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Objective: Synthesis of magnetic nano Iron oxide (Fe3O4) ferrofluid nanoparticles using chemical methods and its characterization studies Method: Iron oxide (Fe3O4) ferrofluid nanoparticles is synthesized by using the chemical co-precipitation technique, ferric and ferrous salts in the alkaline medium, which is known as Reimer’s procedure. Results: Nano iron oxide (Fe3O4) particles have different magnetic properties and different magnetic moments, differentiating macroscopic iron oxide in suspended particles. The ratio of surface to volume increases along with the decrease in atomic size so that the surface properties are essential for using any nano-material. Prepared Fe3O4 nanoparticles were coated with oleic acid (C18H34O2) and polyvinyl butyral((C8H14O2)n), further characterized by Materials characterization techniques (SEM, XRD and FTIR). Magneto-rheological (MR) fluid has been one of the interesting studies the shear stress of PVB coated nano iron with microsphere has approximately the same as of PVB coated nano iron but shows very high shear stress withstanding capacity at 650 s-1 shear rates. Conclusion: The permanence of the magnetic colloidal depends on the thermal contribution and the balance between attractive and repulsive interactions.