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Nanocomposite Fe80 (SiO2)20 films with thickness from 150 to 5000 Å have been prepared by rf magnetron sputtering from a composite target. The crystallites in the Fe80 (SiO2)20 films have a bcc structure with the average size of 46–66 Å which was determined by transmission electron microscopy. As indicated by the thickness dependence of resistivity, the stacking and connectivity of the crystallites depend on the thickness of the films. The magnetic properties also depend on the microstructure which changes with the thickness of the films. The magnetic coercivity of the films increases with the thickness of the film, reaches a maximum, and then decreases. The maximum coercivity of 400 Oe at 300 K and 1200 Oe at 5 K was observed for a film with a thickness of about 700 Å.