In this study, a water-soluble quaternary ammonium salt (QAS)-functionalized montmorillonite (MMT) was fabricated using a mechanochemical method as a high-performance water lubrication additive. The intercalation of QAS into the MMT layer expands the layer spacing of MMT, but does not affect the hydrophilicity of MMT. The ultrathin layer QAS-functionalized montmorillonite (QAS-MMT) demonstrated excellent water-stable dispersion and can be used as a water-based lubrication additive. Only 0.1% addition can reduce the friction coefficient by more than 71.4% and the wear volume by about 58.8% when compared to water, demonstrating its excellent friction reduction and antiwear performance. The frictional mechanism indicates that the physical adsorption film, together with the chemical reaction film, endows the QAS-MMT additives with outstanding tribological performance, provides excellent lubrication for the contact of steel/steel pairs, and prevents the steel surface from being further worn.