A digital micro-holographic (DMH) system is designed for the observation of the micro-structure and mechanism of magneto rhedogical (MR) fluids. To obtain the actual magnification of ferromagnetism micro-particles in the MR fluids, the experimental method using calibration target is employed. The overall-sharpness (OS) method and the constrained least squares (CLS) filter are introduced to enhance the precision of focal plane of ferromagnetism micro-particles determination in digital holography. Based on the digital holography system and these numerical methods, the three-dimensional (3D) distribution of ferromagnetism micro-particles in MR fluids without an applied magnetic field and the micro-structure of MR fluids with an applied magnetic field are investigated. The transformation process of micro-structure of MR fluids under an applied magnetic field is monitored in real-time, the chaining structure, chaining speed and responding time of MR effect are obtained, and the responding time of MR fluids to be millisecond level is verified. The experimental results of MR fluids measured by DMH are contrasted with electron microscope, which indicates DMH is a high-efficiency, simple and real-time measuring system for measurement of behaviors of MR fluids.