Geological formations rich in clay tend to undergo expansion upon contact with water-based drilling fluids. The principal mechanism responsible for the disintegration and swelling of these formations is the migration of hydrogen ions into the nano-scale gaps between layers of shale platelets. Effectively mitigating the challenge of clay swelling involves introducing various materials tailored for shale stabilization into water-based drilling mud. In this article, flaxseed mucilage is used as an environmentally friendly drilling fluid additive in a water-based mud system, with the goal of enhancing the rheological, filtration, and hydrophobic characteristics of the water-based mud. The flaxseed extract was added in the mud in four different concentrations (5 mL, 10 mL, 20 mL, and 50 mL). The result of the study reveals that the rheological properties at 38 and 65 degree centigrade after the addition of 10 mL and 20 mL flaxseed extract remained well within the recommended range set by the American Petroleum Institute (API). Both these samples also demonstrated transport index (> 1.5) at both the temperatures. Moreover, the flaxseed extract was also effective in minimizing the fluid loss from the base mud. The 20 mL of flaxseed extract causes only 15 mL of fluid loss from the base mud, which was also three times lower than the base mud. Additionally, the flaxseed extract muds were also tested on the Ranikot shale sample for its stability. According to the immersion test, samples collected from flaxseed mud demonstrated a smooth surface with no cracks and fractures. Furthermore, these immersed shale pellets also revealed high hydrophobic behavior when tested through contact angle measurement. The 20-mL sample showed the highest hydrophobic behavior with contact angle of 56.056 degrees. Besides this, the 20-mL sample also displayed the highest cutting recovery of 70% out of all the samples. In addition, the 20-mL flaxseed sample also showed less shale swelling behavior in linear dynamic swell-meter test. Almost 1.5 times reduction in shale swelling was recorded with the addition of 20 mL flaxseed extract in the base mud. In light of these compelling findings, the study underscores flaxseed’s potential as an eco-friendly and sustainable alternative to traditional clay stabilizers in drilling operations, with the aim of minimizing formation damage.