Many benefits by use of Oil-Based Mud (OBM) in drilling oil and gas wells have been identified in the oil industries worldwide. However the current ever increasing environmental legislations in preventing OBM application in the industries have dictated the use of water-based drilling fluid as the most environmentally acceptable alternative. On the other hand, drilling with water-based systems in shaly formations may cause many problems such as wellbore instability and high torque and drag. Therefore the most optimum alternatives would be different kinds of inhibited water-based systems in which adverse effects of shaly formations can also be controlled. These water-based alternatives are called High-Performance Water-Based Mud (HPWBM). Also the OBM properties is the final goal of the researchers to reach in their investigations to design a suitable HPWBM since OBM is the ideal drilling fluid to drill problematic formations.In this investigation attempts have been made to develop and formulate a water-based drilling fluid in which a suitable amine derivative has been successfully added to the system as a strong shale inhibitor agent instead of other conventional alternatives. Besides shale inhibition, an important challenge when using amine compounds in HPWBM is to overcome the thermal instability. Such a system must be formulated to achieve the right concentration of each mud additive to satisfy the necessity of a system that provides proper thermal stability during the drilling operation in high temperature sections. The newly HPWBM that was developed in this study comprises a specific concentration of a unique poly-ethoxylated alkyl diamine compound for shale inhibition, an amphoteric/polymeric shale encapsulator, a high-performance lubricant/deflocculating agent and special fluid loss additive to reach thermal stability up to 200°F. The designed system has exhibited optimum rheological properties and shale recovery in laboratory testing that was very close to that of OBM. The designed system has optimally improved the performance of previously formulated HPWBMs.