Tool wear is the critical factor to determine machining economy since it is directly related to tool life and the overall cost of production. Surface integrity (surface finish, microstructure, residual stress, microhardness, and surface chemistry) and service performance (e.g. fatigue life) of machined components can be also adversely affected by tool wear because they deteriorate to an unacceptable level with the progression of tool wear. Therefore, it is necessary to understand and establish the basic relationship between tool wear, surface integrity, and fatigue performance in order to give a general guidance for producing as many quality parts as possible while minimizing machining costs. This study starts with a critical assessment of literature on surface integrity in machining of difficult-to-cut alloys. To significantly improve the accuracy and repeatability of tool wear measurement, a novel online optical tool inspection system has then been developed to integrate with a CNC machining center to monitor tool wear in milling. The progression of tool flank wear of PVD coated inserts in end milling of AISI H13 tool steel and Inconel 718 superalloy were presented to demonstrate the function of the optical tool inspection system. A Taguchi design-of-experiment based dry finish milling of AISI H13 tool steel (50 ± 1 HRc) with (Ti, Al)N/TiN coated cutting tools was conducted to investigate the process-induced surface integrity. The mechanism of surface integrity in hard milling was investigated to understand the effects of mechanical/thermal loads on surface microstructure and properties. The microstructure, microhardness and residual stresses were characterized. A phase transformed white layer was not observed in the context of concerned process parameters. The milled surfaces are characterized by the increased microhardness and high compressive residual stresses, which are beneficial for improving fatigue performance and wear resistance of the machined components. Finally, the process design space for the desired surface integrity has been established via the microhardness and residual stress maps. By using the online optical tool inspection system, tool wear effect on surface integrity and fatigue life of AISI H13 tool steel by dry hard milling using PVD coated tools are studied. The evolutions of surface integrity were characterized at different levels of tool flank wear. At each level of tool flank wear, the effects of cutting speed, feed, and radial depth-of-cut on surface integrity were investigated respectively. It shows that surface roughness in the step-over direction is much higher than that in the feed direction under all the milling conditions. The increased tool wear did not necessarily produce a rougher surface in both directions. Optical images of the subsurface microstructure of the machined samples do not show a noticeable white layer or heat affected zones which may be explained by the characteristic of periodic tool/work contact in milling compared to turning and grinding. Residual stresses are compressive in both directions and are more compressive in the step-over direction than the feed direction. Four-point bending fatigue tests were performed using the samples machined at different flank wear conditions. The results show that generally a worn tool reduces fatigue life, and the larger the tool wear, the shorter the fatigue life. The fractured surfaces of fatigued samples were characterized. Fatigue endurance limits of the machined surfaces at different reliability levels were estimated and correlated with the experimentally determined fatigue life. Tool wear effect on surface integrity and fatigue life of Inconel 718 superalloy by milling using PVD coated tools are also studied. The evolutions of surface integrity including surface roughness, microstructure, and microhardness were characterized at three levels of tool flank wear (VB = 0, 0.1 mm, 0.2 mm). At each level of tool flank wear, the effects of cutting speed, feed, and radial depth-of-cut on surface integrity were investigated respectively. End milling can produce surface finish between 0.1 µm and 0.3 µm under most of the conditions. Roughness is generally higher in step-over direction than feed direction. No obvious white layer is observed in subsurface microstructure. The machined surface is significantly work-hardened due to the dominant mechanical loading. Four-point bending fatigue test shows that none of the milled samples failed within four million cycles. Fatigue endurance limits of the machined samples at different reliability levels were calculated and correlated with the experimentally determined fatigue life.