Magnetorheological finishing (MRF) is a precision material removal process that has been applied to a large variety of brittle materials, from optical glasses to hard crystals, such as sapphire. MRF is based on a magnetorheological (MR) fluid that consists of carbonyl iron powder (CIP), polishing abrasives, water, and stabilizers. To understand and model this process correctly, it is important to study the rheological properties (yield stress and viscosity) of the fluid under the influence of the magnetic field. A detailed study through statistical design of experiments (DOE) is conducted to characterize rheological properties of MR fluid. Three constitutive models viz. Bingham Plastic, Herschel–Bulkley, and Casson fluid are used to characterize the rheological behavior of MR fluid. Response surface methodology (RSM) is applied to predict the effect of volume concentration of each component in MR fluid. Analysis of Variance (ANOVA) is conducted, and contribution of each model term affecting improvement in yield stress and viscosity is calculated. To estimate the saturation magnetization of MR fluid, M-H curve is plotted using vibrating sample magnetometer (VSM), and effect of temperature on yield stress and viscosity is discussed. The experimental results are discussed, and optimum fluid composition is identified from the selected range.