PURPOSE: To produce a magnetic fluid having improved saturation magnetization by dispersing fine particles of a ferrite into a base oil having low vapor pressure stably and in a high concentration.

CONSTITUTION: Inorganic phosphate ions are added to an aqueous suspension of fine particles of a ferrite and the phosphate ions are adsorbed on the fine particles of the ferrite. A solution of an N-polyalkylenepolyamine-substituted alkenylsuccinimide in a hydrocarbon or a water-miscible organic solvent is added to the fine particles of the ferrite to make the Npolyalkylenepolypolyamine-substituted alkenylsuccinimide adsorbed on the fine particles of the ferrite. Water and the hydrocarbon solvent or the water- miscible organic solvent is distilled away and the fine particles on which the N-polyalkylenepolypolyamine-substituted alkenylsuccinimide is adsorbed as the residue are dispersed into a base oil having low vapor pressure to produce the objective magnetic fluid.