NiTi shape memory thin films are potentially desirable for MEMS actuators. Traditionally, there are two approaches to obtain NiTi shape memory thin films. One is to anneal amorphous NiTi films in a vacuum chamber and the other is to deposit NiTi on a high temperature substrate (about 500 °C). Both approaches have difficulty in terms of compatibility with traditional IC techniques, and are not applicable for annealing a prescribed local area of a NiTi film at the micron scale. In this paper, a new approach, CO2 laser annealing, which can overcome both problems mentioned above, is presented. Results of optical microscopy, x-ray diffraction (XRD) and atomic force microscopy (AFM) reveal the crystalline structures and phase transformation in annealed NiTi films. Furthermore, a CO2 laser annealed line, about 100 µm in width, demonstrates the capability of a CO2 laser for local annealing of NiTi thin film.