The optimization of magneto‐optic media for data storage applications involves a detailed consideration of the impact of material properties on the overall performance and reliability characteristics of the complete media design, which includes both the active layer structure and the substrate material. Currently, the most highly developed materials for the active layer are the amorphous rare earth‐transition metal (RE‐TM) alloys. The RE‐TM composition determines both the Curie temperature and the compensation temperature, both of which parameters affect the sensitivity, and therefore the data rate which can be achieved using currently available diode lasers. The thermal and optical characteristics of the active layer thin‐film structure affect the sensitivity, and also determine the degree of enhancement of the shot‐noise‐limited SNR during playback. Reliability of magneto‐optic media is affected by uniform surface oxidation of RE‐TM alloys, which leads to reduced Kerr rotation through the formation of an absorptive surface layer with only in‐plane anisotropy. The proper choice of dielectric passivation layers and deposition process can significantly limit this and other degradation mechanisms. The choice of substrate material must be compatible with the coating process for the active layer structure, provide a stable mechanical interface to the drive mechanisms, and also possess good optical properties, most notably low birefringence. This talk will review the current directions in materials research on magneto‐optic media, and relate the physical characteristics of the materials involved to the major requirements of the data storage application. © 1988, American Institute of Physics. All rights reserved.