Xanthan gum (XG) was widely used as an oilfield chemical treatment agent because of its environmental protection and diverse functions. With the increased drilling depth and formation complexity, the shortcomings such as poor solubility and low resistance to temperature were gradually exposed. In this study, a modified XG derivative XG-g-AAA was synthesized by grafting XG with acrylic acid (AA), acrylamide (AM), and 2-acrylamido-2-methylpropane sulfonic acid (AMPS). The chemical structure of XG-g-AAA was determined by Fourier transform infrared spectroscopy and nuclear magnetic resonance ( 1 H NMR). Then, the solubility, high-temperature rheology and filtration properties, resistance to Na + /Ca 2+ , and compatibility were investigated. Results show that (1) both in aqueous and salt solutions, XG-g-AAA can completely be dissolved within 15 min. The significant improvement of the solubility of XG-g-AAA makes it more suitable for field use. ( 2) XG-g-AAA is less sensitive to high temperatures, and the viscosity decay decreased by 23.3 and 21.3% than XG at 150 and 180 °C, respectively. XG-g-AAA-based drilling fluid is a high-quality drilling fluid with significant shear thinning behavior, and the power-law model is the optimal model to describe its high-temperature rheology. Within 150 °C, 1.5% XG-g-AAA can maintain a reasonable value of the flow behavior index (n) (0.55−0.69), filtration volume (<11.6 mL), and sufficient gel strength (GS). At 150−200 °C, 3% XG-g-AAA is recommended. The value of n was in the range of 0.45−0.62, and the fluid loss was within 10 mL. However, 3% XG-g-AAA cannot provide enough GS at 200 °C; thus, a shear strength-improving agent is recommended to be added. (3) XG-g-AAA showed excellent contamination tolerance and compatibility. It could resist 2 wt % CaCl 2 and 35 wt % NaCl at room temperature and 0.75% CaCl 2 and 5% NaCl after 150 °C aging. (4) XG-g-AAA showed compatibility with sulfonated drilling fluids and could replace commercial fluid loss agents in the formula. Furthermore, the high-temperature fluid loss control mechanism was discussed by analyzing the effects of XG-g-AAA on the bentonite layer spacing, particle size distribution, stability of the colloidal system, and mud cakes.