Ferrofluids belonging to the series NixFe1-xFe2O4 were synthesised by two different procedures-one by standard co-precipitation techniques, the other by co-precipitation for synthesis of particles and dispersion aided by high-energy ball milling with a view to understand the effect of strain and size anisotropy on the magneto-optical properties of ferrofluids. The birefringence measurements were carried out using a standard ellipsometer. The birefringence signal obtained for chemically synthesised samples was satisfactorily fitted to the standard second Langevin function. The ball-milled ferrofluids showed a deviation and their birefringence was enhanced by an order. This large enhancement in the birefringence value cannot be attributed to the increase in grain size of the samples, considering that the grain sizes of sample synthesised by both modes are comparable; instead, it can be attributed to the lattice strain-induced shape anisotropy(oblation) arising from the high-energy ball-milling process. Thus magnetic-optical (MO) signals can be tuned by ball-milling process, which can find potential applications. (C) 2007 Elsevier B.V. All rights reserved.