Using small-angle neutron scattering (SANS), we have investigated the orientational order of iron nanoparticles dispersed in cyclohexanone. The particles have rodlike shape and size distributions with an average length of 200 nm and an average diameter of 25 nm. SANS shows an anisotropy, which is a measure of orientational order, in magnetic dispersions with a volume fraction of 3.2% and 3.9% iron particles in shear flow and/or magnetic field. The scattering anisotropy can be fitted by a model assuming an Onsager distribution of the orientation of the particles in shear flow. The orientational distribution of particles oriented by a magnetic field can be described by a different model assuming the Maier-Saupe orientational distribution for uniaxial ferromagnetic particles. The orientational distribution parameter m for the Maier-Saupe distribution or alpha for the Onsager distribution and the orientational order parameter S have been determined at shear rates gamma of to 0-4000 s(-1) and in magnetic fields of 0-18 mT. The S values indicate that the particles start to orient either in a shear flow of 100 s(-1) or in a magnetic field of 6 mT. Applying only shear results in an orientational order, with the dispersion returning to the disordered state when the shear rate is decreased to zero. In sharp contrast, application of magnetic fields greater than 6 mT results in orientational order in the field-increasing cycle, and two-thirds of the orientational order remains when the field is decreased to zero. This shows that the order in a magnetic field is different from the order in a shear flow, the action of magnetizing the particles along a certain direction is irreversible, and the orientational order parameter exhibits hysteresis.