In order to study the magnetization process in epitaxial NiO/NiFe bilayers grown on single crystal MgO (001) substrates we used the magneto-optical indicator film (MOIF) technique.[16] A transparent Bi-substituted iron garnet indicator film with in-plane anisotropy is placed on top of the sample. Polarized light is passed through the indicator film and reflected by an Al underlayer. The normal component of the magnetic stray field is detected by brightness contrast in a polarizing microscope due to the magneto-optical Faraday effect. Macroscopic hysteresis loops of the bilayers were measured with a vibrating sample magnetometer. The defect structure of the bilayers was determined by surface steps observed in optical reflecting microscope and internal stresses revealed by birefringence in the polarizing microscope.[17] Bilayers of NiO(500Å)/NiFe(100Å) were grown by ion beam sputtering onto a (001) MgO single crystal.[18] Permalloy films grown on (001) MgO without the NiO buffers were also prepared together with the NiO/NiFe bilayers. Both uniaxial (in NiFe) and unidirectional (in NiO/NiFe) anisotropy was created during deposition in the FM layers by means of a 300 Oe uniform permanent magnet field in the plane of the substrate.