The tribological properties of graphite are extremely sensitive to surrounding environment, which affects its longevity and friction reduction performance. This study aims to develop a comprehensive understanding of the effects of a liquid environment on interactions at the sliding interface, thereby influencing the nanoscale tribological properties of graphite surfaces. By combining atomic force microscopy experiments and molecular dynamics simulations, we conducted a comparative analysis of friction and wear behavior of graphite under two different environmental conditions: ambient (air) and underwater condition. Our investigations explored both the step edge and interior (step-free) graphite surfaces. The experimental results revealed a notable contrast in the frictional and wear behavior of graphite at nanoscale in these two environments. The interior surface exhibited a friction coefficient (COF) of approximately 0.003 and 0.006 against a diamond-coated surface in ambient and underwater conditions, respectively. Interestingly, the underwater environment not only increased friction but also significantly compromised the wear resistance of graphene layers near the graphite surface compared to the ambient environment, as evidenced in both step edge and interior step-free regions. The interior region sustained up to ∼7400 nN load in ambient condition but failed at ∼1500 nN under water. Similarly, the step edge failed at ∼375 and ∼187.5 nN in ambient and underwater conditions, respectively. Our simulations revealed that the increased friction in underwater condition is due to resistance of surrounding water molecules during tip sliding. The presence of water at tip-graphite contact interface generated substantial localized stress, leading to the initiation of wear and revealing the pronounced effect of water on the wear characteristics of graphite in underwater condition.