Wellbore instability in shale formations is one of the major problems with water based drilling fluids. The wellbore instability may escalate drilling costs and time. The swelling and dispersion of shale inside the wellbore may lead to high torque, drag, pipe sticking, and additional reaming and borehole enlargement problems. The synthesized graft copolymer is characterized by FTIR, and FESEM techniques. The graft copolymer exhibited superior rheological and filtration properties in the developed drilling fluid system due to increased hydrogen bonding and synergistic effects. The graft copolymer based drilling fluid system has excellent shale inhibition property as compared to PHPA polymer. The shale recovery and slake durability index of graft copolymer based system is higher than PHPA system. This is achieved due to formation of a film-like barrier on the shale surface in presence of graft copolymer, thus restricting the entry of water molecules and solid particles into the shale. The developed system has low reactivity with the core sample as revealed by core flooding studies.