Ferrofluids (sometimes referred as magnetic liquids) are colloidal suspensions of magnetic nanoparticles. They were originally invented independently around the same time in the early 1960s at NASA Lewis Laboratories, and aslo by Dr. R. E. Rosensweig et al. at AVCO Space Systems. Typically, particles within such colloidal suspension are about 10 nanometers (nm) in diameter and suspended in either water or oil.

There are a variety of ways in which nanometer-sized magnetic particles (for example, iron oxide) can be synthesized. One such straightforward reaction is the coprecipitation of magnetite with ammonia out of iron solutions:

Under normal circumstances, a suspension of magnetic nanoparticles is not necessarily stable on its own. Magnetic attraction between the particles, combined with Van der Waal's forces, will result in quick agglomeration and settling of the magnetic phase. In order to prevent the particles from coming too close to each other, various surfactants have been used for different liquid carriers. Once particles are prevented from sticking to each other, the colloidal suspension may be stabilized, provided that external forces, such as gravity, do not settle them down. Fortunately, at an average diameter of 10 nm, the magnetic nanoparticles have enough kinetic energy at room temperature to overcome gravity and can be uniformly distributed within their liquid medium.