In this study, the effect of temperature on the rheological properties and weight loss of a water based bentonite drilling mud modified with iron oxide nanoparticle (nanoFe2O3) was investigated. The bentonite contents in the drilling muds were varied up to 6% by the weight of water and temperature was varied from 25 °C to 85 °C. The nanoFe2O3 content was varied between 0 and 1% by the weight of the drilling mud to modify the rheological properties of the drilling mud. The nanoFe2O3 and bentonite clay were characterized using the X-ray diffraction analysis (XRD) and thermal gravimetric analysis (TGA). In the TGA study, the total weight loss at 800 °C for the bentonite decreased from 13% to 1.16%, a 91% reduction when the bentonite clay was mixed with 1% of nanoFe2O3. The results also showed that 1% of nanoFe2O3 increased the rheological properties of the drilling mud. The nanoFe2O3 modification increased the yield stress (τo) and plastic viscosity (PV) by 45–200% and 20–105% respectively based on the bentonite content and temperature of the drilling mud. The shear thinning behavior of the bentonite drilling mud with and without nanoFe2O3 has been quantified using the hyperbolic model and compared with three parameters Herschel–Bulkley model. The results showed that the hyperbolic model predicted the shear thinning relationship between the shear stress and shear strain rate of the nanoFe2O3 modified bentonite drilling mud very well. Also the hyperbolic model has a maximum shear stress limit whereas the Herschel–Bulkley model did not have a limit on the maximum shear stress. Based on the hyperbolic model the maximum shear stress for the 2%, 4% and 6% bentonite drilling muds without nanoFe2O3 at room temperature were 25 Pa, 35 Pa and 51 Pa respectively. The maximum shear stress for the 2%, 4% and 6% bentonite drilling muds modified with 1% nanoFe2O3 at 25 °C were 59 Pa, 84 Pa and 140 Pa respectively, hence an increase of 135–175% in the ultimate shear stress produced by the nanoFe2O3 treated bentonite was observed. Effects of bentonite content and nanoFe2O3 content on the model parameters have been quantified using a nonlinear model (NLM). The NLM quantified the effect of nanoFe2O3 treatment on all the model parameters.