A novel modified lignosulfonate was prepared by crosslinking lignosulfonate acid with naturally occurring tannin extract in the presence of formaldehyde and further chelating with ferrous ions. The modification reactions were verified by IR analyses and its performances as polymeric thinning agent for aqueous bentonite mud in oilfields were evaluated. Compared with commonly used FeCr-lignosulfonate thinner, the chrome-free modified lignosulfonate without environmental concerns has better thinning ability and can offer better resistance to elevated temperature, as well as matched tolerance to high salinity. In addition, its thinning mechanism was discussed by means of adsorption isotherms, zeta potential measurements, and SEM observations.