We report a new magnetic polymer membrane for MEMS application. The polymeric magnetic composite has coated iron oxide nanoparticles incorporated in a polydimethylsiloxane (PDMS) matrix. Existing magnetic polymeric materials have particle agglomeration problems, which result in rough surfaces and uneven mechanical and optical properties. We show that the use of iron oxide nanoparticles (10 nm in diameter) with fatty acid and hydrophobic coatings inhibits aggregation of particles in the PDMS polymer matrix. Agglomerated particle sizes in thin-film PDMS composites incorporated with uncoated and coated particles are 51 ± 24 μm and 1.6 ± 0.25 μm, respectively. The PDMS composites exhibit saturation magnetization of 22.8 to 23.94 emu g −1 . Stress-strain curves of the composites are characterized by tensile tests. Free-standing magnetic PDMS membranes are fabricated in different sizes from 4 mm to 7 mm in diameter and with the thickness of 35.5 ± 1.5 μm. The membrane of 7 mm diameter achieves deflection of 625 μm in a 0.417 T magnetic field. The magnetic PDMS membranes may be used in micro-pumps and lab-on-a-chip applications.