A high capacity magnetic filter for separating magnetic and non-magnetic contaminants from contaminated liquid streams includes a housing having (i) an interior region between the inlet and outlet for a process stream, (ii) a plurality of vertically oriented, elongated non-magnetic holder sleeves positioned within the interior region (iii) paramagnetic metal packing material that is randomly distributed in the interior region to form a packed compartment that has a void volume which is above 95 percent, and (iv) a device to generate a magnetic field within the interior region. Generation of a uniform magnetic field within the packed compartment magnetizes the holder sleeves and matrix of packing materials. The holder sleeves and matrix create a large surface area for collecting the contaminants.