Current leakage is a serious problem in electro-rheological fluids. In this study, the electrical current leaking through water-activated electro-rheological fluids has been investigated as a function of particle volume fraction, water content, electric field strength and temperature by both static and dynamic experiments. The effect of electric field strength on current leakage is presented in terms of a power-law relation between current density and applied field strength. The nonlinear characteristic of the I-V behaviour of water-activated electro-rheological fluids is a consequence of the nonlinearity of the resistance of the fluid. The exponent in the relation between current density and applied electric field strength was found to depend strongly on the water content but only weakly on the particle volume fraction. The electrolysis of water molecules under the applied electric field is proposed to explain this nonlinearity in electrical resistance of the electro-rheological materials. We note that the temperature-dependency of current density through our electro-rheological fluids is similar to that observed for semiconducting materials, that is the conductivity increases with increasing temperature. The Arrhenius-type activation energy of water-activated electrorheological fluids was also estimated to be about 3 J mol-1 a similar value to that of pure water. An increase in thermal motion of water in the particles (silica in this case) may be a reason for this behaviour. Furthermore, an equilibrium structure consisting of linear chains of particles with branches has been determined from the power-law relation between electrical current and volume fraction of dispersed particles. The electrical current was also measured as the suspension was being subjected to shear. The current decreased as the shear rate increased, implying that the particle chains, formed by the applied electric field, were destroyed by the shear field.