AbstractThe application of an external magnetic field on the magnetic fluids induces needle like structuralization of magnetic particles. The influence of this aggregation of magnetic particles in an external magnetic field H on the magneto‐dielectric behaviour and dielectric breakdown strength of a transformer oil based magnetic fluids was measured. The observed decrease of dielectric breakdown strength (for H = 0 and H ⟂ E vs. distance between electrodes is found to be in agreement with a theory of semi‐classical bond percolation for a non‐linear composite material. In situation when E ‖ H oscillations of dielectric breakdown strength were observed that are associated with a size effect probably.