The experiemental shear stress versus shear rate curves of MR fluids am ana
lysed with the help iof a chain model. Two critical shear rates am found, o
ne corresponding to the onset of agregate breaking and the other correspond
ing to the total disappearance of aggregates. Above this second critical sh
ear rate we observe an abrupt jump of stress and the onset of a layered str
ipe pattern This novel shear induced transition can be observed by using a
cone-plate geometry but is usually smeared out in a plate-plate geometry. S
till in a plate plate geometry we also have observed a similar phase separa
tion in ER fluids but without a clear theological signature. We show that t
his phase separation can be explained by the transition from a nematic like
order induced by the field to an isotropic state which is obtained when th
e shearing hydrodynamic forces on a pair of particles overcome the magnetic
or electrostatic forces. The critical shear stress predicted on this basis
is in good agreement with the experimental results. We find a similar laye
red pattern in a rotating magnetic held. The connection between the two sit
uations is explained.