The tensile deformation and fracture behavior of electrodeposited nanocrystalline Ni-15% Fe alloy samples after annealing for 90 min at 250, 400 and 500 degrees C temperatures were investigated. The structure of the samples was studied using TEM and XRD techniques and the fracture surfaces were investigated employing SEM. The results of this study indicated that annealing at 250 degrees C modified grain size distribution slightly but resulted in a significant increase in the initial strain hardening rate. While the average grain size in the 400 degrees C sample was increased to 59 nm, its yield strength was comparable to the as-deposited alloy with a 9 nm grain size. The plastic tensile elongation of all annealed samples was lowered significantly to less than 1% from approximately 6% in the as-deposited state. These results are discussed in terms of the inhomogeneity of plastic deformation and the evolution of internal stresses in nanocrystalline materials.