Fatty acid-derived ionic liquids (FAILs) are synthesized and then demonstrated as the environmentally-friendly additive to mineral lube base oil for enhancement of lubrication properties. Unlike most of the conventional ionic liquids, FAILs exhibited good miscibility with non-polar mineral lube base oil. The quaternary structure of tetrabutylammonium (TBA) cation, diffused positive charge on the cationic center due to +I effect of alkyl chains, and the alkyl chain of fatty acid anion collectively facilitates the miscibility of FAILs in the mineral lube base oil. Experimental results revealed that 1% FAILs could significantly reduce the friction (16–27%) and wear (9–15%) of lube base oil. The viscosity of these ionic liquids is found to be governed by alkyl chain-length and unsaturation of fatty acid anions, and it exhibited a linear correlation with the coefficient of friction. The elemental mapping of worn surfaces on aluminium disc suggested the formation of ionic liquids-derived tribochemical film, which is accounted for protection of tribo-interfaces to reduce the wear and friction. The FAILs being halogen-free, environment-friendly, having an excellent affinity towards engineering surfaces, and good miscibility with non-polar hydrocarbon lubricants, promised the immense potential for tribological applications.