We describe reproducible technology for fabricating YBa/sub 2/Cu/sub 3/O/sub 7/ step edge Josephson junctions on SrTiO/sub 3/ substrates. We report on the electrical characteristics of the junctions at 77 K and the dependence on the ratio of film thickness to step height. Single-layer gradiometers incorporating step-edge junction dc SQUIDs have been fabricated. We compare the performance of identical SQUID gradiometers based on our step-edge junctions and on 24/spl deg/ SrTiO/sub 3/ bicrystal junctions. Gradiometric SQUIDs (G-SQUIDs) incorporating step-edges have also been fabricated. We measured the effective area of several G-SQUIDs to be in the range of 1-2 /spl mu/m/sup 2/, approximately two orders of magnitude lower than for conventional SQUIDs of similar inductance. We demonstrate that when incorporated into a gradiometer the G-SQUID leads to an improved performance in an unshielded environment.