Sendust films were deposited using dc magnetron sputtering at room temperature in a mixture of Ar and N2 gas. The soft magnetic properties of the sendust films were, in general, improved with the addition of N2. The optimum soft magnetic properties were achieved when 6% N2 gas was used. Transmission electron microscopy studies showed that the sendust film without N2 contains average grain sizes of 200 nm; whereas the films with increasing N2 content contain increasing percentages of much smaller grains of 20 nm. The smaller grains have a random crystalline orientation with respect to each other. The cross-sectional morphological structures were studied using a scanning electron microscope. In the film without N2, power-law cone structures were observed. In the N2 containing films, needlelike morphological structures were formed. X-ray photoelectron spectroscopy studies on these films indicate that N2 included in the films reacts preferentially with Al to form AlN. Excess N2 may then react with Si, possibly to form Si3N4. The atomic concentrations of Al and N become equal in the films when 6% N2 was used, which also gives rise to the optimum soft magnetic properties. To understand the advent of soft magnetic properties, a random magnetic anisotropy model and a static wall coerciv- e force model were considered. © 1998 American Institute of Physics.