A system for determining the magnetic permeability of a material is provided. Two electrical inductors formed as primary and secondary concentric coils share a common magnetic core space. An AC voltage applied to the primary coil creates a magnetic flux in the core proportional to the magnetic permeability of a sample of the material positioned within the core space. The magnetic flux induces an AC voltage in the secondary coil indicative of the sample magnetic permeability. 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. Sensitivity and resolution can be increased by using two identical sets of coils wherein a reference material forms a core for the primary set and the MR fluid sample forms a core for the secondary set.