Co-ZnO films were prepared on oxidised silicon by magnetron sputtering at room temperature both with and without a ZnO buffer-layer. The Co-ZnO films consisted of Co particles dispersed in a semiconductor matrix. The combination of a Co-ZnO layer and a ZnO buffer-layer has a higher magnetoresistance than the Co-ZnO layer alone on an insulating Si substrate. The causes of this effect were investigated using X-ray photoelectron spectroscopy, depth profiling using Auger electron spectroscopy and electrical resistance as well as measurements of the change in the saturation magnetisation, the field cooled- and zero field cooled-magnetisation. This work has shown clearly what criteria are needed to optimise the magnetoresistance and how these conditions may be met by adding a buffer-layer thus making granular films based on ZnO more suitable for applications as field sensors.