We report on magnetotransport measurements of spin valve films that have been fabricated into rectangular stripes with Au current leads. The spin valve films consisted of two magnetic NiFe layers separated by a nonmagnetic Cu layer. The top NiFe layer was magnetically pinned by a FeMn layer with an effective pinning field of 12 kA/m (150 Oe). After device fabrication, the transport properties changed dramatically as the stripe‐height of the device was decreased below 1 &mgr;m. Internal demagnetizing fields and magnetostatic interactions between the magnetic layers dominated the magnetic response. These interactions change the biasing point and the linearity, and cause a decrease in sensitivity to field changes. We have developed a simple single‐domain rotation model that includes magnetostatic, anisotropy, and exchange interactions to describe the magnetic behavior, from which we calculate the transport response. ©1996 American Institute of Physics.