Molecular and Brownian dynamics simulations are used to investigate the frequency-dependent dielectric relaxation of ferrofluids, with the objective of identifying features characteristic of dipolar chain formation at low densities. It is shown that the presence of chains gives rise to a high frequency band associated with the vibrational motion of dipoles within the chains. This band serves as a "signature" of association and is not present in dipolar fluids at higher, liquid-like densities. A simple theory that traps the basic features of the relaxation behavior is also presented. (C) 2002 American Institute of Physics.