Magnetite for Water-based ferrofluid was synthesized by air oxidation of aqueous suspension in the pH range 7-12 at $65^{circ}C$. The optimum condition of magneite formation was delineated by examining various physicochemcial properties such as Fe2+ content, phase characteristics, MHC and $sigma$max. The point of zero charge of iron oxide powders obtained at various pH conditions were correlated with the oxidation state of Fe in the iron oxide. The magnetite powder prepared at pH 9 ws dispersed using sodium oleate and sodium dodecylbenzenesulfonate (SDBS) as dispersants, and the dispersion characteristics of the magnetite ferrofluid were examined by means of the fraction of solid dispersed, zeta potential data and FT-IR spectrum. A simple calculation on the potential energy of two interacting magnetite particles showed that the dispersion stability was directly correlated with height of the potential energy barrier or the shape of zeta potential.