In contrary to the common notion that MoS2 is ineffective in water environment, this study evidentially justifies the potential of aqueous MoS2 nanofluid as a cutting fluid in grinding application. The ceramic-metal composite, WC-Co has been ground under small quantity cooling lubrication environment using this nanofluid. Parameters like grinding forces, surface roughness, chip, surface morphology and residual stress were under the focus of the study to assess the performance of the nanofluid beside commonly used soluble oil. The suitability of aqueous MoS2 nanofluid as a lubricant and coolant was first evaluated by conducting tribological and hot plate experiments, respectively. The cooling capability of MoS2 nanofluids, when dosed in aerosol form at the grinding interface extended grit sharpness which led to prolonged shearing action of the grits as compared to rapid grit dulling observed in alternative environments like flood cooling and small quantity cooling and lubrication using soluble oil. The chips formed during MoS2 nanofluid aerosol were also finer due to strain hardening of the cobalt phase leading to premature, stunted ductile fracture of the material. The residual stress of ground surface under nano-small quantity cooling lubrication environment was less compressive than small quantity cooling lubrication with soluble oil due to reduced rubbing by sharper grits. The overall outperformance of aqueous MoS2 nanofluid over soluble oil as cutting fluid is thus established.