Rheological property is very important for magnetorheological fluids, but tribological property also is a crucial factor to determine whether magnetorheological fluids can work stably. In order to find suitable carbonyl iron powder for magnetorheological fluids, three magnetorheological fluids are prepared by ordinary, reduced, and phosphated carbonyl iron powders, and their properties are compared. The microstructures of the different carbonyl iron powders are observed by scanning electron microscopy and X-ray diffraction. Sedimentation stability of the magnetorheological fluids is obtained by observation. The tribological and rheological properties are measured by friction testing machine and rotational rheometer. The results show that MRF-pho have superior tribological property and sedimentation stability, MRF-ord have higher shear yield stress, MRF-red have better comprehensive properties.