Electrorheological (ER) fluids are smart materials which have the ability to control electric and mechanical devices such as shock absorbers, dampers, clutches and engine mounts under the effect of electric field. Their apparent viscosity is increased rapidly and is reversible due to the formation of particle chains upon the application of an electric field. The main problems in conventional ER fluids are low shear stress, sedimentation and narrow temperature range. To solve these problems, some composite particles as disperse phases of the ER fluid are fabricated and new ER fluids are developed respectively. In this paper, graphite/TiO2 composite particles were obtained by sol-gel technique. Thickness control of the dielectric layer was achieved by solution concentration and process duration. It is crucial to avoid particle coagulation during the process, so an electric power mixer was used in the process. After heating to 650degreesC for 8 hours to remove all organic components, the composite particles were collected as ashes and dispersed in damping oil to form the composite particle, suspension. The heating also serves to properly anneal the TiO2 coating with the very desirable properties of high dielectric constant, excellent adhesion and hardness. The structure and characteristic of the composite particles are analyzed by XRD, SEM, TG-TDA. When the composite particles were mixed with damping oil, the volume fraction was assigned to 0.25,0.15. The current density of the ER fluid was determined by measuring the current passing through the fluid, then dividing the current by the area of the electrodes in contact with the fluid. The rheological properties of the ER fluid were measured by a Couette-typt rheometer under shear rates of 1-136s(-1) and AC electric fields of 0-3kV/mm. The ratio value of shear stress with the electric field to with no applied electric field is calculated to estimate the ER effect of the ER fluid. The experiment results show that the current density of the ER fluid is higher, than conventional ER fluids due to the polarized characteristic of the composite particles. The shear stress of the ER fluid increases with the increasing of the electric field and exhibits a typical Bingham flow behaviour. The results also demonstrate an excellent ER performance (tau/tau(0) = 1200) compared with conventional ER fluids (tau/tau(0) less than or equal to500) under a shear rate of 2.11 s(-1) and an electric field of 3kV/mm. The sedimentation of the ER fluid is improved obviously due to the components of the composite particle. Although some problems need to be solved further, the ER fluid is very feasible in ER shock absorbers and other applications.