Conventional grinding fluid is widely used in grinding process, which results in high consumption and impacting the environment. The promising alternative to conventional dry and fluid coolant application is minimum quantity lubrication (MQL). It is known that the cooling and lubrication performance of the grinding fluid is the key technical area for the success application of MQL grinding process. In this study, Water based $Al_2O_3$ nanofluid was applied to grinding process with MQL approach for its excellent convection heat transfer and thermal conductivity properties. The grinding characteristics of hardened AISI 52100 steel were investigated and compared with those of wet, dry and pure water MQL grinding. Experimental results show that water based $Al_2O_3$ nanofluid MQL grinding can significantly reduce the grinding temperature, decrease the grinding forces, improve the ground surface morphology and reduce the surface roughness in comparison to pure water MQL grinding. Furthermore, the cooling and lubricating mechanism for nanofluid MQL grinding was discussed in detail.