A novel in-fiber integrated modulator based on magnetic fluid is proposed. The Fe3O4 magnetic fluid is encapsulated into a specially designed capillary optical fiber with a circular waveguide. Experimental results show that the light at 632.8 nm in the circular waveguide can be modulated by only 2.17 x 10(-2) mu L of the magnetic fluid under magnetic field. A wide range of modulation-depth from 44% to 75% can be obtained by adjusting the external magnetic field strength, temperature and the concentration of the magnetic fluid. In addition, the modulator shows good stability and repeatability. This work has great potentials in the integrated optical devices such as tunable in-fiber modulators, optical switches and magnetic sensors.