In the current study, an optimized nano- Fe3O4 based ferro-magnetic lubricant was developed by using mechanical mixing technique. Fe3O4 nanoparticles in 1, 3, 5 and 7 weight percentages were dispersed in group-2 N500 base oil containing 5 wt % of oleic acid as surfactant. The stabilities of the lubricants were evaluated by calculating their sedimentation over of a period of 196 days. The mechanical mixing speed, time and the weight fraction of nano- Fe3O4 particles were optimized by using Taguchi’s L16 orthogonal array. The wear scar diameter obtained in the ASTM D4172-B four-ball test was considered as the output response in the optimization. The ANOVA test revealed the maximum influence of mixing speed on the wear scar diameter followed by the time and concentration. Finally, the optimum parameter setting of 1 wt. % nano- Fe3O4 particles, 3000 rpm and 15 mins of mixing time was obtained. Thereafter, the anti-wear performance of the optimized ferro-magnetic lubricant was studied under the variable magnetic field (0-54 mT) for 15 minutes. It was observed that at 26 mT magnetic field intensity the wear scar diameter was minimum and a reduction of approximately 35 % in the wear scar diameter was observed as compared to the base oil.