This paper proposes a new variable inductor for efficient power conversion which consists of the ferrite core and the gap filled with a magnetorheological fluid. Its main feature is to show a large inductance variation versus inductor currents even with a simple inductor structure and so it leads to improving light and intermediate load efficiency of power conversion systems compared with the conventional inductor with an air gap. To predict the characteristics of the variable inductor, the nonlinear magnetic permeability of the magnetorheological fluid used is accurately measured because the inductance value strongly depends on the magnetic nonlinearity of the fluid. With the obtained B-H curve, a 1 kVA variable inductor is designed and analyzed with three-dimensional finite element method taking into account the losses of the core and the fluid. Finally, to prove the feasibility and usefulness of the proposed inductor, a prototype inductor is fabricated and its experimental results are compared with numerical ones.