Old fool drinking one in watering hole (5)
I believe the answer is:
oasis
'watering hole' is the definition.
(I've seen this before)
'old fool drinking one' is the wordplay.
'old' becomes 'o' (common abbreviation eg in OE for Old English).
'fool' becomes 'ass' (both can mean a stupid person).
'drinking' is an insertion indicator (inserted letters are consumed or drunk).
'one' becomes 'i' (Roman numeral).
'ass' enclosing 'i' is 'asis'.
'o'+'asis'='OASIS'
'in' acts as a link.
(Other definitions for oasis that I've seen before include "Area of calm amid hectic surroundings" , "Fertile tract in a desert" , "Place of refreshment" , "source of water" , "Peaceful area away from trouble" .)