The amorphous Fe40 Ni40 B20 alloy shows excellent soft magnetic properties when heat-treated at 630 K for 10-15 min. The improved magnetic softness is attributed to the relaxation of internal stress. The relaxation behaviour obeys the so-called ‘In t’ kinetics. Small crystalline particles do appear after longer duration isothermal treatment at 630 K which is much lower than the crystallization temperature. Formation of crystalline particles induces magnetocrystalline anisotropy in the system which in turn detoriorates the magnetic softness. © 1994, The Japan Institute of Metals. All rights reserved.