A magneto-optical chip of Fe-(Co6Ag94) granular films was fabricated by using of combinatorial Fe ions implanting into co-sputtered Co6Ag94 films and 16 units with different Fe content were prepared via binary masking scheme. The structures and surface morphologies of as-prepared and annealed Fe-Co6Ag94 films were analyzed by X-ray diffraction and atomic force microscopy respectively. It reveals that the Co, Fe and FeCo granules precipitate, grow and then form nanoparticles embedded in the Ag matrix during annealing. In addition, the measurement of the magneto-optic polar Kerr effect shows that Kerr rotation increases with increasing Fe content, which contributes to the magnetic moment. Precipitation and growth of the magnetic granules during annealing also increase the Kerr rotation due to the size effects. Further, Mossbauer study confirms that the formation of granules with certain size plays a principal role in the enhancement of magneto-optic polar Kerr effect. (C) 2003 Elsevier Ltd. All rights reserved.