In this study, molecular dynamics simulations were used to simulate the iterative rotational friction of nickel-based single crystals using diamond grinding balls in both the presence and absence of water. First, the friction force, depth and morphology of wear marks, wear rate, and evolution of internal defects during the friction process of nickel-based single crystals were investigated. Second, a comparative study of the frictional wear of nickel-based single crystals in both the presence and absence of water was carried out in terms of temperature, water molecule distribution, atomic displacement vector, and wear scar depth during the friction process. Finally, the formation process of irregular grinding chips under aqueous conditions was elucidated. The following phenomena were observed: As the number of rubs increased, the single rub depth of the workpiece, the wear rate, and the rate of increase in the number of defective atoms produced all decreased. A comparison of friction under aqueous and water-free conditions showed that, in the presence of water, the force exerted by the grinding ball on the workpiece was shared by the water molecules. This resulted in a decrease in the roughness of the machined surface, a reduction in the number of internally generated layer errors, a lower overall friction temperature, and a nickel matrix that was protected by water molecules. Finally, when grinding under aqueous conditions, water molecules interfered with the normal chip removal process of the grinding balls, leading to the production of irregular grinding chips.