Machining performance and environmental impact are regarded as two crucial indicators for sustainable electrical discharge machining (EDM). However, conventional EDM commonly uses kerosene as dielectric, and it has many shortages, such as poor safety, low machining efficiency, and unfriendly environmental impact. In order to overcome these shortages and meet the requirement of sustainable EDM, a novel water in oil (W/O) nanoemulsion dielectric is proposed in this study. A set of experiments by using W/O nanoemulsion and kerosene as dielectric in sinking EDM are conducted to compare machining performance and environmental impact of dielectrics. The effects of main process parameters on material removal rate (MRR) and relative electrode wear rate (REWR) are studied. The surface morphology, elementary composition, and cross section of the machined workpiece are also investigated. Moreover, the compositions of released gases during sinking EDM are analyzed. The results show that, compared with kerosene, the maximum increase of 44.64% in MRR, meanwhile the decrease of 40.33% in REWR can be attained by using W/O nanoemulsion in sinking EDM. Machined workpiece surface with fewer cracks and pores, and cross section with thinner recast layer and heat affected zone is formed in W/O nanoemulsion instead of kerosene. The types of generated toxic and harmful gases during sinking EDM are also significantly reduced when using W/O nanoemulsion as dielectric. These show that W/O nanoemulsion more suitable than kerosene to achieve sustainable EDM.