Magnetostriction is the property that causes certain ferromagnetic materials to change shape in a magnetic field. Terfenol-D is said to produce "giant" magnetostriction, strain greater than any other commercially available smart material. Magnetic domains in the crystal rotate when a magnetic field is applied, providing proportional, positive and repeatable expansion in microseconds.

The mechanism of magnetostriction can act as a very sensitive sensor by converting mechanical work into electrical energy. Rather than having an external magnetic field force the rotation of magnetic domains to deform the crystal to do mechanical work, devices can be made where mechanical vibrations or loads deform the crystal and, in doing so, rotate the magnetic domains, which generates a transient current. While most attention has been focused on the active aspect of the material (electrical-to-mechanical), several different applications have recently begun to exploit the reverse phenomenon of the material, commonly called to Villari Effect.