Titanium dioxide nanoparticles (TiO2) were synthesized and then dual-coated with silane coupling agent (KH-570) and OP-10 in sequence in order to be dispersed stably in water as lubricant additives. The tribological properties and the application performance in Q235 steel machining of the nanoparticles as water-based lubricant additives were investigated on an MSR-10D four-ball tribotester and on a bench drilling machine, respectively. Scanning electron microscope (SEM) and atomic force microscope (AFM) were used to analyze the worn surface. The results show that the surface-modified TiO2 nanoparticles can remarkably improve the load-carrying capacity, the friction reducing, and anti wear abilities of pure water. The wear scar diameter and the coefficient of friction of the water-based lubricating fluids with TiO2 nanoparticles decreased, and the thick deep furrows on the surface of wear scar also decreased obviously with the increase of TiO2 concentration. The power consumption in drilling process was lower and the cutting surface was smoother using the water-based lubricating fluids added TiO2 nanoparticles compared to the fluid without addition. The reason for nanoparticles improving tribological properties of water based lubricating fluid might be the formation of a dynamic deposition film during rubbing process according to analysis of the worn surface.