Spherical crystalline Fe nanoparticles, ∼100 nm in diameter, were synthesized under Ar–50% H 2 arc-plasma. These nanoparticles were dispersed in silicone oil after silane treatment on as-grown thin oxide layer (∼2 nm) to make their surfaces hydrophobic. The resulting Fe nanoparticles exhibited a high saturation magnetization of ∼190 emu/g at room temperature. The static magnetorheological behavior was measured for the colloidal dispersion (solid concentration: 15 vol%) at room temperature under magnetic flux densities of 0–0.3 T, using a parallel-plate-type commercial rheometer. The yield stress continuously increased with magnetic flux density, demonstrating the Bingham plastic behavior. Moreover, subjecting the sample to a magnetic flux density of 0.3 T increased the yield stress by ∼10 2. Additionally, the colloidal dispersion exhibited good stability against sedimentation.