A new N-(3-(diethoxyphosphoryl)propyl)-N,N-dimethyloctadecan- 1-ammonium bromide (NP) surfactant was synthesized. The NP together with 1 wt% sodium D-gluconate or 1 wt% triethanolamine displays remarkable lubricating property as the water-based lubricant additive and provides a non-corrosive environment for steel in aqueous solution. The lubricating mechanism was tentatively discussed according to electrical contact resistance, X-ray photoelectron spectroscopy and Quartz Crystal Microbalance measurement. These results show a stable protective film is formed on the contact surface by physical adsorption and tribo-chemical reactions. Surprisingly, the water-based additive has excellent anti-friction properties comparable to oil-based lubricants and superior to cationic surfactant analogue. Therefore, this NP is a potential efficient additive in water-based lubricating fluids.