Magnetometer data from four Galileo passes by the Jovian moon Europa and three passes by Callisto are used to interpret the properties of the plasma surrounding these moons and to identify internal sources of magnetic perturbations. Near Europa the measurements are consistent with a plasma rich in pickup ions whose source is freshly ionized neutrals sputtered off of the moon's surface or atmosphere. The plasma effects vary with Europa's height above the center of Jupiter's extended plasma disk. Europa is comet-like when near the center of the current sheet. It is therefore likely that the strength of the currents coupling Europa to Jupiter's ionosphere and the brightness of a Europa footprint will depend on System III longitude. Magnetic perturbations on the scale of Europa's radius can arise from a permanent dipole moment or from an induced dipole moment driven by the time-varying part of Jupiter's magnetospheric field at Europa's orbit. Both models provide satisfactory fits. An induced dipole moment is favored because it requires no adjustable parameters. The inductive response of a conductive sphere also fits perturbations on two passes near Callisto. The implied dipole moment flips direction as is predicted for greatly differing orientations of Jupiter's magnetospheric field near Callisto in the two cases. For both moons the current carrying shells implied by induction must be located near the surface. An ionosphere cannot provide the current path, as its conductivity is too small, but a near surface ocean of ~10 km or more in thickness would explain the observations. ¿ 1999 American Geophysical Union