Large density of the dispersed phase in magnetorheological (MR) fluids has hindered operating MR test and their industrial application. This present work adopted Fe3O4 nanoparticles to prepare MR fluid because of their moderate density and good magnetic property. Furthermore, in order to resolve aggregation problem of Fe3O4 particles due to their nano-scaled size, conducting polypyrrole (PPY) was synthesized around naono-sized Fe3O4 particles via conventional oxidation polymerization. Weight ratio of PPY to Fe3O4 was adjusted to be 5% to avoid possible deterioration of the magnetic property of Fe3O4 particles. TEM images described the morphology for PPY-Fe3O4, and XRD pattern provided information on structural characterization and particle size. Finally, MR performances of pure Fe3O4 and PPY-Fe3O4 nanocomposites were investigated via rotational and oscillatory tests.