It is well-known that the tip of an Atomic Force Microscope (AFM) can act as a cutting tool for machining various types of materials. In this article, AFM machining experiments have been conducted to investigate the machining characteristics of a nickel-iron thin film material. The influences of the machining parameters on the resulting machined geometries and surfaces are specifically investigated. The machining parameters considered include the normal applied force, number of machining cycles, machining speed, and machining direction. To demonstrate its versatility, the machining technique developed has been applied for fabricating a NiFe based nanostructure required by many ferromagnetic devices. All results indicate that the machined groove size can be well correlated with and precisely controlled by the applied force and the machining cyclic number. The AFM machining technique is indeed simple and predictable for machining nanostructures with specified dimension and controllable precision.