Purpose: This paper concerns manufacturing and researching a new group of the magnetostrictive composite materials, consisting Tb0.3Dy0.7Fe1.9 particles in different polymer matrix. Design/methodology/approach: The following investigation studies have been carried out: the structures of the Tb0.3Dy0.7Fe1.9 powders, the topography of composite materials fractures with the use of electron scanning microscopy; chemical composition of the Tb0.3Dy0.7Fe1.9 powders using the EDS method; phase composition of the Tb0.3Dy0.7Fe1.9 powders and composite materials using X-ray diffraction; as well as properties of the composite materials with polyurethane matrix reinforced with Tb0.3Dy0.7Fe1.9 particles including: density, thermal conductivity (in magnetic field also), electrical and magnetic properties, as well as magnetostriction in magnetic field intensity up to 800 kA/m using a three terminal capacitance technique. Findings: Based on the examination carried out it was found that the highest magnetostriction equals to 805∙10-6 (with magnetic field intensity of 766 kA/m) characterizes a composite material with polyurethane matrix, reinforced with Tb0.3Dy0.7Fe1.9 powder of 20% volume fraction and particles size in the range of 38-106 μm. Simultaneously, the materials is characterized with coercion intensity Hc=5.39 kA/m, remanence Br=0.013 T and magnetic permeability μr=1.13. Moreover, it was found that the maximum magnetostriction value for this material assumes values approximate to the magnetostriction of monolithic Tb0.3Dy0.7Fe1.9 alloy. Additionally, it was confirmed that the correlation exists between the diversification of the volume fraction of Tb0.3Dy0.7Fe1.9 powder in the matrix, its particle distribution and the maximum magnetostriction and magnetic properties of the developed composite materials. The key factor determining the energy transfer efficiency between Tb0.3Dy0.7Fe1.9 and matrix is – in addition to the size and volume fraction of the magnetostrictive particles in the matrix – the method of combining those two phases. Originality/value: The paper presents the research involving the composite material with giant magnetostriction.