A sealed, rolling element bearing includes an inner race attached to a shaft, an outer race attached to a housing, a plurality of rolling elements in an annular region and a pair of shields extending inwardly from the outer race toward the inner race so as to substantially enclose the annular region. The shields have a closely-spaced, noncontacting relationship with the inner race thereby defining gaps. The elements of the bearing are of magnetically permeable material, and the sealed bearing includes means for producing a magnetic field in the gaps and in the regions where the rolling elements contact the races. A ferrofluid is retained by the magnetic field in the gaps for sealing and in the regions of contact between the rolling elements and the races for lubrication. A reservoir of ferrofluid in the regions between the two seals replenishes ferrofluid lost at the sealing and lubrication areas. The magnetic field can be produced by permanent magnetization of the bearing assembly or by axially polarized permanent magnets located on either or both ends of the outer race. Such a bearing may be used with a magnetic or nonmagnetic shaft and permits relative motion between the shaft and the housing. The housing material is of nonmagnetic type when external magnets are used.