The present work demonstrates the synthesis of the bis-phosphonium cation (2P888-C4)-based, fatty acid derived ionic liquids for water-based lubricants. As additives to water, these ionic liquids formed a stable emulsion. The positive zeta potential revealed the 2P888-C4 cation as the outer layer of emulsion, whereas fatty acid anions are organized within the emulsion. The long-term emulsion stability, good thermal conductivity, and excellent surface wettability by these ionic liquids emulsion make them promising candidates for lubrication applications. The 2% 2P888-C4 cation based ionic liquid in water decreased the wear and friction of steel tribo pair by 52 and 85%. The transportation of ionic liquids in the form of emulsions to contact interfaces and their release from emulsion under the contact-stress effectively lubricated the tribo interfaces. It gradually yielded the ionic-liquids-derived tribochemical thin film. The microscopic and spectroscopic analyses of wear tracks further supported the formation of the ionic-liquids-based thin film. The oleate anion with longer alkyl chains furnished the better quality thin film; thus, oleate-anionconstituted 2P888-C4 ionic liquids displayed better lubrication properties than the shorter chain (caprylate) analogoues.