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This paper explores the effect of Al on the initial permeability of nanocrystalline Fe-Si-Mo-B-Cu-type soft magnetic alloys. It is shown that improved properties, in particular permeability, occur over a small window around 1 at.% of Al addition. Contrary to the earlier reports, our results suggest that the addition of Al promotes higher number density of α-Fe(Si) crystallites as well as higher volume fraction. The 3-dimensional atom probe study indicates that Al primarily partitions in the α-Fe(Si) phase. However, significant segregation of Al is also observed in copper cluster suggesting its role in promoting nucleation of α-Fe(Si) phase. Permeability is shown to evolve as a function of composition due to the competition between the decreasing magnetization of the alloy owing to the incorporation of Al in α-Fe(Si) and increase in the number density and volume of α-Fe(Si,Al) phase. [ABSTRACT FROM AUTHOR]