Platinum (Pt) has been added to Co-ITO (ITO: indium tin oxide) films to promote the formation of Co(Pt)-ITO granular structure by a two-step method which includes sputtering deposition at room temperature and postdeposition thermal annealing in a vacuum. Such films consist of magnetic Co(Pt) nanoparticles distributed uniformly in an amorphous ITO matrix. The Co(Pt) particles are formed during the thermal annealing by precipitation, and the matrix also contains certain amount of Co and Pt that suppress the crystallization of the amorphous ITO. Pt plays an important role in controlling the precipitation of Co(Pt) particles and the microstructure formation. First, by adding Pt into the films, more Co can be incorporated into the amorphous phase in the as-deposited state, which ensures sufficient Co to form magnetic particles through precipitation. Second, by incorporating Co and Pt into the film, the crystallization temperature of amorphous ITO is also increased to a temperature as high as 400 degrees C. These two effects make it possible to fabricate the Co(Pt)-ITO granular magnetoresistance films by the two-step method. (c) 2006 American Vacuum Society.