Magnetostriction data are reported for NiFe/Ag multilayer thin films displaying giant magnetoresistance. Magnetostriction and magnetoresistance were measured as functions of annealing temperature for NiFe/Ag samples having different numbers of NiFe/Ag bilayers and Ag spacer thicknesses. They varied systematically with annealing temperature in a manner consistent with residual stress reduction and microstructural changes such as grain-boundary diffusion and grain growth. Zero magnetostriction concurrent with high magnetoresistance ratio (5%) and field sensitivity [7.5%/(kA/m) (0.6%/Oe)] was observed for an optimal multilayer configuration and annealing temperature. This combination of zero magnetostriction and high magnetoresistive response makes the NiFe/Ag multilayer system an attractive candidate for high-performance magnetic recording read-head sensors.