The grain-oriented rare-earth iron alloy, Trefonol D (Tb0.3 Dy0.7 Fe1.95), exhibits exceptionally high magnetostrictive strain capability. Using the flextensional shell to couple the rare-earth rod motion to the water medium, very high acoustic source levels may be achieved compared to a piezoelectric driven flextensional transducer. Also, due to the lower elastic modulus of Terfenol D, a smaller transducer results for a given frequency. A source level of 200 dB re: 1 μPa at 1 m was achieved at 1350 Hz for an experimental transducer having the shell dimensions of 6.8 in. × 6 in. × 3.1 in. Future flextensional transducers, using the rare earth alloy, will incorporate improvements that will reduce losses due to eddy currents and provide depth compensation.