A bearing and magnetic fluid seal assembly includes a shaft mounted by axially spaced-apart bearings for rotation relative to a housing. A magnetic fluid seal includes an annular magnet axially positioned between the bearings in the space that is wasted and not utilized for any purpose, and a thin, disk-like annular polepiece positioned between one of the bearings and the environment to be protected by the seal. Magnetic flux from the magnet is conducted by a magnetically permeable housing or shaft to an annular gap between the inside diameter of the polepiece and the shaft. A magnetic fluid is retained in the gap by the magnetic flux, thereby providing an exclusion seal. Embodiments utilizing radially and axially polarized magnets are provided. A magnetic fluid seal can be provided at each end of the assembly. The bearings supporting the shaft can be magnetically permeable or nonmagnetic. The seal(s) can be electrically conducting or nonconducting depending upon the type of ferrofluid used.