Based on the requirements of torque transmission for stability and saturation magnetization of magnetorheological fluid (MRF), an orthogonal test was designed to arrange for the preparation of MRF. MRF was prepared by chemical co-precipitation method, in which Fe3O4 nano-particles were coated with polyethylene glycol(PEG-4000). The size and distribution of particles were observed by transmission electron microscope (TEM). The saturation magnetization was measured by vibrating sample magnetometer(VSM). Through analysis of variance of orthogonal test,an optimal method for preparing a highly stable and saturation magnetization MRF was summarized. Four main parameters in preparation of MRF were discussed, including the rate of amount of substance between Fe2+and Fe3+, the rate of amount of substance between PEG-4000 and Fe2+, reaction time and the reaction temperature. It has important practical significance on the study of magnetorheological transmission device.