A system for determining magnetic permeability of a material. Two electrical inductors formed as primary and secondary concentric coils share a common magnetic core space. A first AC voltage applied to the primary coil creates a magnetic flux in the core proportional to the magnetic permeability of the material. The magnetic flux induces an AC voltage in the secondary coil indicative of the apparent magnetic permeability of the sample. The apparent permeability is corrected for conductivity by imposing a second AC voltage and resistor in series across first and second electrodes disposed in the material. When the material is a magnetorheological fluid, the magnetic permeability is proportional to the concentration of magnetic particles in the sample and can be back-calculated from the amplitude of the secondary voltage signal.