The effect of structural and surface morphological developments on the soft magnetic properties of Fe71Nb3.7Cu1Al3Mn0.8Si13.5B7 alloy was investigated. AFM studies showed that the material, which was amorphous in the as-cast state indicated segregates in the form of Cu atoms seated within the holes in the surface topography. With an increase in annealing temperature, nucleation and subsequent growth of alpha-Fe phase from the adjoining matrix on these nucleating Cu atoms was manifested in the form of magnetic softening. At optimum temperature Si and Al dissolved from adjoining matrix on these alpha-Fe phase indicating relatively low surface roughness and ultrasoft magnetic properties. The correlation between the surface morphology and magnetic properties were explained by nucleation and growth model. At elevated temperatures formation of strongly magnetocrystalline anisotropic crystalline phases like Fe-borides and Fe7Nb6 deteriorated the soft magnetic properties. The occurrence of these phases in the form of multiple protrusions increased surface roughness. (C) 2004 Elsevier B.V. All rights reserved.