This paper focuses on understanding stress development in CuNi42Mn1 thin films during annealing in Ar. In addition to stress-temperature measurements, resistance-temperature investigations and chemical and microstructural characterization by Auger electron spectroscopy, scanning and transmission electron microscopy, x-ray diffraction, and atomic force microscopy were also carried out. The films are polycrystalline with a grain size of 20 nm up to 450 °C. To explain the stress evolution above 120 °C, atomic rearrangement (excess-vacancy annihilation, grain-boundary relaxation, and shrinkage of grain-boundary voids) and oxidation were considered. Grain-boundary relaxation was found to be the dominating process up to 250–300 °C. A sharp transition from compressive to tensile stress between 300 and 380 °C is explained by the formation of a NiO surface layer due to reaction with the remaining oxygen in the Ar atmosphere. This oxidation is masking the inherent structural relaxation above 300 °C.