The precipitation of Co particles in the heterogeneous Cu88Co12 ribbon has been successfully investigated by using HRTEM and EDS. The presence of Co particles in Cu matrix was revealed by darker contrast in HRTEM image and the variations of chemical composition in the corresponding regions in the samples annealed at 450 degrees C for different time. Longer annealing caused a coarsening and further gathering of the Co particles in the alloy. The comparison of GMR effect with the microstructural evolution of Cu88Co12 ribbon indicates that the size and the distribution of Co particles in Cu matrix play an important role in explaining GMR effect. Cu matrix and fee Co precipitates have a cubic-cubic orientation relationship. The misfit of the lattice parameters between Cu matrix and Co precipitate was matched by the occurrence of interfacial dislocation and lattice distortion at the Cu/Co interface.