The dielectric properties (permittivity, loss factor, dielectric breakdown strength) of magnetic liquids were investigated. The magnetic liquids were composed of magnetite particles coated with oleic acid as surfactant and dispersed in transformer oil. To determine their dielectric properties they were subjected to a uniform magnetic field at high alternating electric fields up to 14 MV m(-1). Nearly constant permittivity of magnetic liquid with particle volume concentration Φ = 0.0019 as a function of electric field was observed. Magnetic liquids with concentrations Φ = 0.019 and 0.032 showed significant changes of permittivity and loss factor dependent on electric and magnetic fields. The best concentration of magnetic fluid was found at which partial current impulse magnitudes were the lowest. The breakdown strength distribution of the magnetic liquid with Φ = 0.0025 was fitted with the Duxbury-Leath, Weibull and Gauss distribution functions.