In this work, we introduce an effective model for both ideal and viscous fluid dynamics within the framework of kinetic field theory (KFT). The main application we have in mind is cosmic structure formation where gaseous components need to be gravitationally coupled to dark matter. However, we expect that the fluid model is much more widely applicable. The idea behind the effective model is similar to that of smoothed particle hydrodynamics. By introducing mesoscopic particles equipped with a position, a momentum, and an enthalpy, we construct a free theory for such particles and derive suitable interaction operators. We then show that the model indeed leads to the correct macroscopic evolution equations, namely the continuity, Euler, Navier-Stokes, and energy conservation equations of both ideal and viscous hydrodynamics.