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The authors develop an optical-fiber modulator using magnetic fluid as a cladding layer in this work. By applying magnetic fields, the authors reduced the optical-fiber modulator transmission. Experimental results show that the magnetically induced transmission loss of an optical-fiber modulator under external magnetic fields is dominated by the number of magnetic clusters in the cladding magnetic fluid. Furthermore, it was observed that the formation of magnetic clusters depends on the length of the fiber modulator. In this work, the authors also develop a theoretical model to clarify the transmission characterization of magnetic-fluid optical-fiber modulators.