Throughout the world, the construction industry produces significant amounts of by-products and hazardous waste materials. The steel-making industry generates welding waste and dusts that are toxic to the environment and pose many economic challenges. Water-based drilling fluids (WBDF) are able to remove the drill cuttings in a wellbore and maintain the stability of the wellbore to prevent formation damage. To the best of our knowledge, this is the first study that reports the application of welding waste and its derived graphene oxide (GO) as a fluid-loss additive in drilling fluids. In this research, GO was successfully synthesized from welding waste through chemical exfoliation. The examination was confirmed using XRD, FTIR, FESEM and EDX analyses. The synthesized welding waste-derived GO in WBDF is competent in improving rheological properties by increasing plastic viscosity (PV), yield point (YP) and gel strength (GS), while reducing filtrate loss (FL) and mud cake thickness (MCT). This study shows the effect of additives such as welding waste, welding waste-derived GO and commercial GO, and their amount, on the rheological properties of WBDF. Concentrations of these additives were used at 0.01 ppb, 0.1 ppb and 0.5 ppb. Based on the experiment results, raw welding waste and welding waste-derived GO showed better performance compared with commercial GO. Among filtration properties, FL and MCT were reduced by 33.3% and 39.7% with the addition of 0.5 ppb of raw welding-waste additive, while for 0.5 ppb of welding waste-derived GO additive, FL and MCT were reduced by 26.7% and 20.9%, respectively. By recycling industrial welding waste, this research conveys state-of-the-art and low-cost drilling fluids that aid in waste management, and reduce the adverse environmental and commercial ramifications of toxic wastes.