We describe the structural and magnetoresistive properties of Ag‐Co and Ag‐Ni granular alloys that were grown epitaxially on MgO{100} substrates. With substrate temperatures in the range 300–400 °C and up to 25 vol% of the ferromagnetic constituent (Co or Ni) x‐ray analyses showed that the Ag matrices were elastically strained (by stretching at the interface with the substrate), but had relaxed lattice constants that were the same as that of pure Ag. This excludes the possibility of significant amounts of dissolved Co or Ni. The Co and Ni precipitates gave lattice spacings that were consistent with somewhat smaller strains. Growth at 200 °C appears to yield only partial precipitation of the Co or Ni, as judged by a 20% reduction in saturation magnetization from the values obtained with growth at 300–400 °C. Replacement of Co by Ni in otherwise similar alloys causes an increase in the size of the ferromagnetic precipitates. This leads to a decrease in surface area that combines with a decrease in saturation magnetization to give substantially smaller magnetoresistance in Ag‐Ni than in Ag‐Co. With both alloy systems, decrease of the substrate temperature leads to decreased precipitate size whose influence is seen in the magnitude of the magnetoresistance, the temperature dependence of the hysteresis, and the rate of approach to saturation with applied magnetic field. ©1995 American Institute of Physics.