This paper describes a new efficient in-droplet magnetic particle concentration and separation method, where magnetic particles are concentrated and separated into a split droplet by using a permanent magnet and EWOD (electrowetting on dielectric) droplet manipulation. To evaluate the method, testing devices are fabricated by the micro fabrication technology. First, this method is examined for magnetic particle concentration, showing that over 91% of magnetic particles can be concentrated into a split daughter droplet. Then, separation between magnetic and non-magnetic particles is examined for two different cases of particle mixture, showing in both cases that over 91% of the magnetic particles can be concentrated into split daughter droplets. However, a significant number of the non-magnetic particles (over 35%) co-exist with the magnetic particles in the same daughter droplets. This problem is circumvented by adding a droplet-merging step prior to applying the magnetic field. Finally, over 94% of the total magnetic particles are separated into a one split daughter droplet while 92% of the non-magnetic particles into the other split daughter droplet. This integrated in-droplet separation method may bridge many existing magnetic particle assays to digital microfluidics and extend their application scope.