In this study, we investigate the properties, with a special focus on the magnetic attributes, of NiFe2O4 (NFO)/BaTiO3 (BTO) multiferroic heterostructures, examining individual layer thicknesses ranging from 3 to 12 nm. X-ray diffraction reveals that as BTO thickness increases, NFO transitions from a nonstrained cubic lattice to a compressively strained tetragonal lattice. In contrast, thicker NFO layers introduce enhanced tensile stresses on the BTO layer, counteracting the compressive strain originating from the SrTiO3 (STO) substrate. Piezoresponse force microscopy demonstrates that the polarization switching voltage escalates with increasing BTO layer thickness. Through X-ray magnetic circular dichroism measurements coupled with multiplet theory, we elucidate variations in the magnetic moments and ionic distributions within the NFO layers. Remarkably, a larger BTO thickness is associated with a chemical reduction of Fe ions in the NFO layer, indicative of increased oxygen vacancies, which are induced by the increasing compressive strain as evidenced by first-principles calculations. Thinner NFO layers showed increased tetrahedral (Td) site vacancies and oxygen vacancies concomitant with reduced magnetic moments, which can be optimized by either increasing NFO thickness or through air annealing at 450 °C. Combining the ionic distribution variation with in-plane lattice parameter evolution during growth, we postulated that the reduced magnetic moments originate from a 2–3 nm antiferromagnetic rock salt NiO/FeO formed at the beginning of NFO growth, while the air annealing restores the magnetism by oxidizing and arranging the NiO/FeO into spinel NFO under the synergistic effect of oxygen and heat. Air annealing at moderate temperature appears as a very efficient method to restore the magnetization of ultrathin layers of NFO, allowing us to overcome a major drawback for these compounds, which hampers their utilization in spintronics applications so far.