This paper reports the development of a new class of anisotropically conductive materials based on magnetic alignment of conductive particles in nonconductive matrix materials such as elastomeric or adhesive polymers. These composites contain many vertically aligned but laterally isolated chains of ferromagnetic metal spheres, the ends of which protrude from the surfaces for better electrical contact. These novel composite structures exhibit Z-direction-only electrical conduction (>1012 to 1 anisotropy ratio), which, in combination with the compliant nature of the materials, can be exploited advantageously for a variety of electronic applications including fine-pitch, area-array, circuit interconnections, circuit-testing, heat sink interfacing, and sensor devices. The movement and alignment of magnetic particles in a viscous medium, and the stability of configurations in a magnetic field will be discussed. The properties of the composite materials as well as potential circuit and device applications will be discussed.