If Permalloy (76 percent Ni-24 percent Fe) which has been previously quenched from 600°C is annealed at 490°C, its energy content decreases with time of annealing, not monotonically but in two steps. By direct measurement of the time-rate of energy decrease, it was concluded that the first step is connected with formation of short-range order and the second with that of longrange order. The effect of a magnetic field applied during the course of cooling on the maximum permeability is associated mainly with formation of short-range order. Taking into consideration the fact that the saturation of the ordered state is about 4 percent higher than that of the disordered one, one would expect the short-range order to develop in the form of prolate ellipsoids elongated in the direction of spontaneous magnetization. Torque curves, measured on a disk cut from a Permalloy crystal parallel to the (110) plane and heat treated in a magnetic field showed uniaxial anisotropy, superposed on the ordinary cubic one. This uniaxial anisotropy increases with the formation of short-range order, but the formation of long-range order, followed after that of short-range one, has a tendency to annihilate it. The constricted hysteresis loop, which is characteristic of the Perminvar property, becomes most eminent at the end of short-range order formation. If we assume two neighboring uniaxial domains, whose axes intersect perpendicularly with each other, and whose boundary bisects the angle between them, we can easily calculate the hysteresis loop of constricted form. The main characteristic of this model is that the displacement of the boundary cannot take place even in a strong field.