Lost circulation of drilling fluid is one of the most serious and expensive problems facing the drilling industry. The present invention relates to an improved drilling fluid for reducing or preventing lost circulation to an underground formation surrounding a well bore in the process of drilling a well. The drilling fluid comprises a base fluid and wax or waxy substance as a primary seepage loss agent. The invention also provides a method of reducing or preventing lost circulation to an underground formation surrounding a well bore in the process of drilling a well using the drilling fluid of the invention, wherein the primary seepage loss agent is added to the drilling fluid, either before or during drilling, and the drilling fluid is pumped down hole during drilling.