The invention is devised to provide a method of manufacturing a thin film magnetic head including a magnetoresistive element having higher reading performance. In manufacturing the thin film magnetic head, after forming an MR element 15, a pair of magnetic domain controlling layers 16 are formed by stacking a buffer layer 161, a magnetic bias layer 162 and a cap layer 163 in this order on both sides, in a track-width direction, of the MR element 15 via an insulating layer 14 respectively. Then, a cap layer 17 is formed so as to cover the upper surface of the MR element 15 and connect the pair of cap-layers 163. After that, a gap adjustment layer 18 and a top shielding layer 19 are formed in order so as to cover the pair of cap layers 163 and the cap layer 17, thereby a read head section 10 is completed. In this manner, the upper surface of the magnetic bias layer 162 is in contact only with the cap-layer 17 and the cap-layer 163, which are made of a material excellent in crystal lattice compatibility with the magnetic bias layer 162. As a result, the coercive force of the magnetic bias layer 162 can be increased. What is more, roughness of the undersurface of the top shielding layer 19 can be improved because of the presence of the cap layer 17.