Magnetic fluids are substances with controllable rheological properties, containing nano- or micro- sizedparticles with magnetic properties suspended in a carrier fluid. The production of such fluids poses variouschallenges, but the critical issue is the fabrication of magnetically active particles of known size and requiredproperties. They are usually produced using the ‘bottom-up’ method, where larger structures are formedduring chemical synthesis and physical processes. This method is the most economical and practical in termsof efficiency, mainly when producing nanoparticles. The essence of the second method, ‘top-down,’ involvesthe fragmentation of the material, mainly through chemical-mechanical processes like milling. This methodtakes more time but does not involve the generation of environmentally harmful substances. It is characterizedby simplicity and provides greater control over the sizes of the produced particles. The paper presents theresults of research on the production of magnetic fluids based on carbonyl iron powder, which was fragmentedusing a planetary micro-mill. Powders differing in particle size and magnetic properties were considered.Oleic acid and oleoyl sarcosine were used as surfactants. Particle size and rheological properties of theobtained magnetic fluids were examined. The aim of the study was to determine the feasibility of producingmagnetic fluids on a laboratory scale with designed physicochemical parameters. The research outcome isdeveloping a procedure for obtaining a magnetic fluid that combines ferrofluid and magnetorheological fluidcharacteristics.