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The effective magnetic permeability of composite materials containing fine iron particles of 1–2 μm size is investigated theoretically and experimentally. This permeability is considered due to both the ferromagnetic properties of iron and the generation of eddy currents by an alternating magnetic field. An analytical result shows that as the percolation threshold is approached, the skin effect in large conducting clusters dominates, suppressing the ferromagnetic behavior for any value of frequency. As a result of this, the effective permeability tends to become zero near the percolation threshold, having a ‘‘ν’’ form anomaly. The experimental data for frequencies of 6–10 GHz where the skin depth is of the order of a particle size, clearly exhibit a sharp decrease near the percolation threshold in the real part of the effective magnetic permeability. We believe this is the first observation of a possible magnetic anomaly in a percolating system.