We report time-resolved light-scattering measurements showing that a magnetic suspension quenched in a strong magnetic field undergoes a dynamic instability with a selected wave vector. In the plane normal to the Geld, the suspension phase-separates self-similarly into columns of circular cross-section and is described by an extremely small dynamic exponent, This phase separation is shown to be dominated by a single diffusing mode, with a wave vector that corresponds to the peak of the final steady-state structure factor. This finding is explained with a mean-field model of phase separation.