In the present article, the theological responses and dispersion stability of magnetorheological (MR) fluids were investigated experimentally. Suspensions of magnetite and carbonyl iron particles were prepared as model MR fluids. Under an external magnetic field (H-0) and a steady shear flow the yield stress depends upon H-0(3/2). The Yield stress depended on the volume fraction of the particle (phi) linearly only at low concentration and increased faster at high fraction. Rheological behavior of MR fluids subjected to a small-strain oscillatory shear flow was investigated as a function of the strain amplitude, frequency, and the external magnetic field. In order to improve the stability of MR fluid, ferromagnetic Co-gamma -Fe2O3 and CrO2 particles were added as the stabilizing and thickening agent in the carbonyl iron suspension. Such needle-like particles seem to play a role in the steric repulsion between the relatively large carbonyl iron particles, resulting in improved stability against rapid sedimentation of dense iron particles. Furthermore, the additive-containing MR suspensions exhibited larger yield stress, especially at higher magnetic field strength.