The investigation of devitrification in thermally annealed nanodimensional glassy alloy thin films provides a comprehensive understanding of their thermal stability, which can be used to explore potential applications. The amorphous to crystalline polymorphous transformation of cosputtered Ni-Zr alloy (Ni78Zr22 at. %) films, with a thickness lower than the reported critical limit of devitrification, was studied through detailed structural characterization and molecular dynamics (MD) simulations. Devitrification to a nanocrystalline state (Ni7Zr2 structure) was observed at 800 °C, with an increase in density (∼3.6%) much higher than that achieved in bulk alloys. Variation in the magnetic property of the films and the overall physical structure including morphology and composition were examined before and after annealing. MD simulations were employed to effectively elucidate not only the high densification but also the increased magnetic moment after annealing, which was correlated with the simulated change in the coordination number around Ni atoms. The structural relaxation process accompanying devitrification was described as a disorder-to-order transformation while highlighting the crucial role played by chemical short range order prevalent in glassy materials.