Permalloy films were deposited by an RF magnetron sputtering method using several different targets which had been cold-rolled and annealed at various temperatures to give different microstructure and texture. The grain refinement occurs at high temperature annealing due to recrystallization and subsequently the initial (110) target texture transforms to the random texture. The coercive forces of thin films fabricated using targets which are not recrystallized are below 0.2 Oe in the AI pressure range of 1~5 mTorr and the lowest coercive force achieved is 0.07 Oe. The low value of coercive force, 0.25 Oe, is only obtained at the sputtering conditions of 400 W and 1 mTorr, and 300 W and 5 mTorr when recrystallized targets are used. The internal stress changes from compressive to tensile as the Ar pressure increases, the stress-free being at 5 mTorr. The changes of coercive force and permeability can be well interpreted by the differences from the composition and the internal stress.