A rare earth-iron intermetallic compound Tb(0.3)Dy(0.7)Fe(1.90), also called Terfenol-D, has a gigantic room temperature magnetostriction at a relatively small magnetic field. In this study microsegregation of Tb and Dy in directionally solidified Terfenol-D was investigated. It was predicted from a calculated phase diagram and experimentally verified that Tb concentration at the center of the cell which solidified earlier was lower than that at the cell boundary. In order to homogenize this microsegregation, specimens were annealed at 1000℃ for 40 hours, and various magnetic properties were measured as a function of applied field under uniaxial compressive stress in the range from 0.5 to 12 MPa. After the annealing, the maximum magnetostriction increased at a compressive stress below 9 MPa, magnetostrictive coefficient d(33) and magneto-elastic coupling coefficient k(33) increased, but permeability decreased. These results may be due to the reduction of magnetocrystalline energy which was locally very high before annealing due to microsegregation.