Abstract: The models of the unsheared and the sheared of single magnetic chain formed by magnetic particles were constructed, and then based on the magnetic dipole theory, combined with the chain mechanism of magnetic particles, the shear stress model of magnetorheological fluid was deduced, and its rationality was verified by the experimental values of shear yield stress, thus revealing the grinding mechanism of composite magnetorheological fluid, which lays a foundation for the development of high performance magnetorheological fluid. The effects of volume fraction of magnetic particles and magnetic induction intensity on the shear yield stress of magnetorheological fluid were also studied in this paper, it was concluded that the shear yield stress increase both with the increase of magnetic induction intensity and the increase of volume fraction of magnetic particle. When the volume fraction of magnetic particles was 14%, the magnetorheological fluid with larger shear yield stress and better fluidity can be achived. In this paper, the maximum tangential micro-cutting force of a single composite magnetic particle was analyzed by constructing the force diagram of a single composite magnetic particle during grinding.