We report the first results of functional properties of nitrogenized silver-permalloy thin films deposited on polyethylene terephthalic ester {PETE (C10H8O4)n} flexible substrates by magnetron sputtering. These new soft magnetic thin films have magnetization that is comparable to pure Ni81Fe19 permalloy films. Two target compositions (Ni76Fe19Ag5 and Ni72Fe18Ag10) were used to study the effect of compositional variation and sputtering parameters, including nitrogen flow rate on the phase evolution and surface properties. Aggregate flow rate and total pressure of Ar+N2 mixture was 60 sccm and 0.55 Pa, respectively. The distance between target and the substrate was kept at 100 mm, while using sputtering power from 100–130 W. Average film deposition rate was confirmed at around 2.05 nm/min for argon atmosphere and was reduced to 1.8 nm/min in reactive nitrogen atmosphere. X-ray diffraction, X-ray photoelectron spectroscopy, scanning electron microscopy, vibrating sample magnetometer, and contact angle measurements were used to characterize the functional properties. Nano sized character of films was confirmed by XRD and SEM. It is found that the grain size was reduced by the formation of nitride phase, which in turns enhanced the magnetization and lowers the coercivity. Magnetic field coupling efficiency limit was determined from 1.6–2 GHz frequency limit. The results of comparable magnetic performance, lowest magnetic loss, and highest surface free energy, confirming that 15 sccm nitrogen flow rate at 115 W is optimal for producing Ag-doped permalloy flexible thin films having excellent magnetic field coupling efficiency.