A new type of ionic liquid was synthesized from lignin, tetrabutylphosphorus hydroxide, and benzotriazole, and its potential utility as a water-based lubricating additive was studied by comparing the performance of water containing the lubricating additive with that of water. The additive not only decreases the friction and wear of water on steel but also decreases the corrosive effect of water on steel, and improves the utilization rate of lignin, which is difficult to use. The mechanistic analysis of the lubrication in the presence of the ionic liquid revealed that a protective film containing nitrogen is formed on the surface of the steel/steel friction pair, which blocks direct contact of the friction pair and thus induces excellent tribological properties.