Impedance control and compliant behavior for safe human-robot physical interaction of industrial robots normally can be achieved by using active compliance control of actuators based on various sensor data. Alternatively, passive devices allow controllable compliance motion but usually are mechanically complex. We present another approach using a novel actuation mechanism based on magneto-rheological fluid (MRF) that incorporates variable stiffness directly into the joints. In this paper, we have investigated and analyzed principle characteristics of MRF actuation mechanism and presented the analytical-model. Then we have developed the static and dynamic model based on experimental test results and have discussed three essential modes of motion needed for human-robot manipulation interactive tasks.