The magnetocapacitance effect was investigated using impedance spectroscopy on single crystals of LuFe(2)O(4). The intrinsic impedance response could be separated from the interfacial response and showed a clear hysteresis loop below T(Ferri)∼240 K under the magnetic field. The neutron diffraction experiment under the magnetic field proves the origin of the dielectric property related to the motion of the nanosized ferromagnetic domain boundary. These results imply that the modification of the microscopic domain structure is responsible for the magnetoelectric effect in LuFe(2)O(4).