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Permalloy thin films were deposited onto MgO(001) substrates by standard sputtering technique at growth temperatures ranging from 200 to 800 °C. Both reflection high-energy electron diffraction (RHEED) experiments and atomic force microscopy observations reveal that the substrate temperature for two-dimensional epitaxial growth should not exceed 350 °C. A series of permalloy films with thicknesses ranging from 3.5 to 100 nm was prepared at 300 °C. All films were grown as (001) single crystal with the same crystallographic orientations as the MgO(001) substrates. As evidenced by RHEED and x-ray diffraction, films with thicknesses larger than about 20 nm present a structural relaxation. The in-plane magnetization hysteresis loops obtained by longitudinal Kerr loop measurements exhibit a 〈100〉 fourfold cubic anisotropy and an enhancement of the magnetic softness with decreasing film thickness, both likely originating from the large interfacial strain configuration.