Although Much has been published on giant Magnetoresistance (GMR) in co-deposited thin films [1–4], only little  has been published on the structure-property relationships limiting the effect. Here, we report the results of microstructural characterization of NiFeAg thin films that exhibit a GMR effect. The as-deposited films show a sizeable GMR effect. The Maximum GMR effect observed was 6.4% with -4k0e FWHM of the 6P/P peak. Upon annealing these films, the GMR at first increases, and then decreases. We present microstructural evidence from TEM and XRD, amongst other techniques, which shows that this is a consequence of the initial NiFeAg thin film agglomerating into NiFe grains in a predominantly Ag segregant Matrix. Upon extended annealing, excessive grain growth leads to a decrease in the GMR as predicted by the model of Berkowitz, et al. .