The interface magnetostriction (MS), lambda(i) of NiFe: films (thicknesses : 50 to 500 Angstrom) encapsulated with Ta and Al2O3 layers was studied in as-deposited and thermally annealed states. The MS of NiFe films encapsulated with only Ta (or Al2O3) layers increase (or decrease) rapidly with decreasing NiFe thickness, due to giant positive (or negative) lambda(i). The magnitudes of both positive and negative lambda(i) increase noticeably with processing at elevated temperatures. In structures containing Ta/NiFe and NiFe/Al2O3 interfaces, the total interfacial MS contribution is greatly reduced due to the opposite signs of lambda(i) at NiFe interfaces, leading to negligible thickness dependence of the effective MS in as-deposited and annealed states, The strong interfacial MS induced anisotropy affects markedly the uniaxial anisotropy of NiFe films for thicknesses below 100 Angstrom.