Combinatorial pulsed laser deposition (PLD) makes use of the angular spread of laser-ablated material to prepare thin films with lateral compositional gradient. In this paper we have used combinatorial PLD to grow discontinuous Fe/MgO multilayers by alternate ablation from two separate Fe and MgO targets. Films of composition [Fe(t Fe)/MgO(t MgO)]15 were deposited on glass substrates. The thickness of Fe and MgO were varied in the vicinity of critical values determined in previous studies to maximize the tunneling magnetoresistance (TMR) in the current-in-plane configuration. Optimized multilayers show a substantial improvement of both TMR and field sensitivity at room temperature.