In this study, TbDy-Fe giant magnetostrictive thin films were firstly prepared by ion beam sputtering deposition (IBSD) method on water-cooled substrates, and then the films were annealed at different temperatures under vacuum condition. An Inductively Coupled Plasma Spectrometry, Scanning Electron Microscope (SEM), Scanning Probe Microscope (SPM), and Transmission Electron Microscope (TEM) were used to investigate the surface morphology and microstructure for TbDy-Fe GMFs. Besides, DWS type Ultra-precision Displacement Meter was used for measuring magnetostriction coefficient of the films by cantilever method. The results showed that TbDy-Fe GMFs of compact amorphous microstructure, smooth surface morphology, and high interfacial adhesion had been deposited under the fixed fabrication procedure. Moreover, as annealing temperature increased, microstructure of the films had been changed as following order: amorphous → amorphous + microcrystalline → nano-polycrystalline (crystallization temperature was about 400 ). It was noted that magnetostriction of TbDy-Fe GMFs could be drastically improved, particularly for low magnetic field magnetostriction sensitivity when annealed at about 400 (the value of λ was about 500ppm at 200KA•m-1).