A detailed investigation of magnetic impurity-mediated interlayer exchange coupling observed in Cu 0.94 Mn 0.06 / Co multilayers using polarized neutron reflectometry and magnetic x-ray techniques is reported. Excellent descriptions of temperature and magnetic field dependent biquadratic coupling are obtained using a variant of the loose spin model that takes into account the distribution of the impurity Mn ions in three dimensions. Positional disorder of the magnetic impurities is shown to enhance biquadratic coupling via a new contribution J fluct 2 , leading to a temperature dependent canting of magnetic domains in the multilayer. These results provide measurable effects on RKKY coupling associated with the distribution of impurities within planes parallel to the interfaces.