Abstract: Rare earth composite cobalt ferrite ionic magnetic fluids were prepared by precipitation in the presence of Tri-sodium citrate. The sample phase, structure and particle sizes were determined by X-ray diffraction transmission and electron microscopy. It is clear that the particles appear as variously sized balls, Cobalt ferrite with sizes of 12-15 nm, Dysprosium cobalt ferrite and Yttrium cobalt ferrite with sizes of 6-8 nm. By adding rare earth ions, the average diameter of the magnetic nanoparticles was decreased. The decrease in diameter was explained using a micro-model of rare earth modification. The effect of rare earth ion modification on the saturation magnetization and magnetic induction of magnetic fluids was carried out using a Gouy magnetic balance and a spectrophotometer. The result shows that saturation magnetization and magnetic induction can be improved by adding Dy3+. By adding Y3+, magnetic induction was increased. However, the saturation magnetization then decreased. A theory of the mechanism of rare earth ion modification is discussed in detail.