We have fabricated submicron giant magnetoresistive (GMR) structures and evaluated their sensitivity for biomagnetic applications. GMR devices were fabricated using electron beam lithography, with minimum dimensions below 100 nm. We developed a new characterization technique for these sensors, using a scanned nanoscale magnetic probe and monitoring the resulting response of the sensors. The magnetic field from the scanned probe is similar to that generated by the magnetic particles used to tag bioanalytes. The devices demonstrated extremely high magnetic field resolution. Noise measurements, combined with a local field sensitivity from the scanned probe measurements, predict a sensitivity of 2×10⁻¹⁶ emu/Hz^1/2 for a magnetic particle 100 nm above the sensor surface. This corresponds to detection of single 100 nm commercially available magnetic labels, which are the lowest size scale of labels now used in biological studies, with a signal-to-noise of unity. Additionally, we predict detection of single 200 nm magnetic labels with a position sensitivity of 93 nm/Hz^1/2, allowing proximity detection for particles not directly bound to the sensor surface, with a corresponding signal-to-noise of 10.