High quality YBa2Cu3Oy (YBCO) thin films for directly coupled DC-SQUIDs were fabricated by pulsed laser deposition. Several critical parameters have been optimized through systematic studies. The best quality YBCO thin films on MgO and on LaAlO3 substrates were made under the O-2 pressure of 400 similar to 500 mTorr at the substrate temperature of 780 similar to 800 degrees C and target to substrate distance of 50 similar to 60 mm. Films showing a T-c above 91 K and J(c) above 2x10(6) A/cm(2) at 77 K were routinely obtained. Extensive AFM and x-ray diffraction studies have been conducted for morphological and structural analyses. The directly coupled DC-SQUIDs were fabricated from the YBCO thin films deposited on SrTiO3 bicrystals under the optimized conditions. Measurement of 2I(c) and swing voltage gives values of 420 mu A and 30 mu V at 77 K, respectively.