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CoFe–Cu granular films with ferromagnetic content ranging from 0.10 to 0.33 by volume were prepared by radio frequency sputtering. As-cast samples were rapidly annealed at various temperatures up to 750 °C to promote the segregation of CoFe particles within the metallic matrix. Magnetic and transport properties suggested that this family of samples may be classified into three groups: (i) below about 0.20 volume content of CoFe, all samples display the typical features of a granular solid constituted by a random distribution of nanometric CoFe particles within a Cu matrix, and the maximum magnetoresistance is about 20% at low temperature (giant magnetoresistance); (ii) for as-cast samples within 0.20 and 0.30 of volume concentration, magnetoresistance and magnetization display complex bimodal behavior and large metastable effects associated with the interparticle interactions, which stabilize a domain-like microstructure well below the volume percolation threshold (0.55), as already observed in CoFe–Ag(Cu) granular alloys. As a consequence of the large magnetic correlations, magnetoresistance is very low (1%–3%). Through annealing, the microstructure and therefore the transport properties evolve to those of a classical giant magnetoresistance system with large particles; and (iii) above about 0.30 of volume content (and still below the volume percolation threshold), as-cast samples display both anisotropic and giant magnetoresistance, as also observed in other granular alloys. Annealing leads to complete segregation and to the formation of large magnetic particles, which results in a transition from mixed behavior of both anisotropic and giant magnetoresistance (GMR) regimes to a giant magnetoresistance regime, with a maximum GMR of about 7%. © 1999 American Institute of Physics.