Biodegradable magnesium alloy (AZ31) is promising due to its biodegradability and superior properties. However, severe built-up edge formation and a high chip ignition risk during machining increase tool wear and fire hazards. To address this, a novel biodegradable green cutting fluid (GCF) was synthesized to enhance the alloy's machinability. The GCF’s biodegradation, thermal conductivity, contact angle, and rheological properties were characterized and compared with mineral oil (MO). Its performance in minimum quantity cutting fluid (MQCF) mode was evaluated against dry and flood applications for workpiece surface morphologhy and tool wear. GCF exhibited excellent lubrication, heat dissipation, cooling, and degradation capabilities. Under optimal cutting conditions, it achieved a 19.9% reduction in surface roughness and significantly reduced flank and rake tool wear.