One of the major design obstacles in the conventional MR actuators with a permanent magnet is the demagnetization of a permanent magnet and large power consumption. In order to cope with the above problems, this paper presents a new design methodology to avoid the demagnetization of a permanent magnet. The MR rotary brake with a permanent magnet is manufactured, based on the shear operating mode to check the performance. Due to the permanent magnet, the MR rotary brake can give resistance to the external disturbance and give the fail-safe capacity to the system when the power supply is accidentally cut off. As we apply the positive or negative current to the solenoid, the resistance torque of the MR rotary brake can be reduced to almost a half of the nominal resistance or increased up to the magnetic saturation point. Effectiveness of the MR rotary brake is demonstrated through the position control based on a DC motor and a MR brake.