Neutron depolarization experiments have shown that the intragranular magnetic domain structure of polycrystalline ferrites exhibits a marked grain size dependence. Below a grain size of around $3~\mu \text{m}$ , the magnetic domain structure changes from the two-domain to the mono-domain state. Ferrites composed of mono-domain grains exhibit low dissipation at megahertz frequencies. This is attributed to the absence of intragranular domain wall movement, i.e., a microscopic origin for dissipation in ferrites has been identified. The implications of this clear observation and evidence for a transition from the mono- to two-domain state in ferrites for micromagnetic theory when a single particle becomes monodomain, as well as for the initial permeability mechanisms in polycrystalline ferrites, are discussed.