In this paper, in order to apply magnetic fluid with superparamagnetic property as the substitute of ferromagnetic materials, physical properties of magnetic fluid are investigated. A targeted drug delivery system using a capsule filled magnetic fluid is proposed where a magnetic fluid capsule and cylinders are considered as a drug and vital organs, respectively. The dynamic governing equation of this system first is derived. Fluid viscosity, clearance between a cylinder and a magnetic fluid capsule, and levitation height with respect to different cylinder height are considered as major parameters to evaluate dynamic characteristics of the system. The experiments and simulations for the position control of the magnetic fluid capsule in various cylinders are conducted using PID controller. The results show that magnetic fluid with the superparamagnetic property can be applied to a targeted drug delivery system.