MR fluids are produced by dispersing micron-sized ferri-magnetic particles in oil. Generally, the presence of foreign particles in a lubricant affects the sliding behavior of the lubricated surface. Accordingly, the dispersed particles in MR fluids should significantly affect the lubrication properties of the fluids. In this study, we investigated the lubrication properties of MR fluids through sliding tests and in situ observations, while focusing on the behavior of the dispersed particles. MR fluids containing dispersed particles of various diameters were tested. The results of the sliding tests suggested that the MR fluid with the smallest particles exhibited the best lubrication characteristics. Surface observations showed the presence of grooves on the lubricated surfaces after wear. It is assumed that the grooves are formed by the abrasive action of the dispersed particles and that they affect the behavior of the particles. In-situ observations proved that, in the case of flat surfaces, the dispersed particles remained stationary during sliding. On the other hand, in case of grooved surfaces, they moved along the grooves. Given these results, it can be surmised that the grooves on the worn surface changed the behavior of the particles and improved the lubricity of MR fluids.