This paper describes the preparation and characterization of a novel dispersion of silica coated magnetic particles. It is shown that by controlling the separation distance between the particles in the dispersion a considerable improvement in dispersion quality and recording performance of rigid disks is realized. Magnetic dispersions were prepared by coating γFe2O3and Co-epitaxial γFe2O3particles, in a slightly acidic aqueous environment, with colloidal silica particles (4 & 7 nm in size). In order to enhance the particle compatibility with non-polar solvents and binders the silic surface was chemically modified by replacing hydroxyl groups residing on the silica surface with methyl groups. Recording performance of rigid disks prepared with the silica coated magnetic particles was evaluated. Considerable improvement in particle orientability, S/N, defect density and resolution were realized.