An in-process milling tool monitoring system has been developed using a laser displacement sensor. The system reconstructs and displays the 3-D image of a milling tool and evaluates tool geometric failures via a hybrid laser sensor measurement method which uses displacement and intensity techniques simultaneously. The system is designed to compensate interruptions in the laser path brought about by chips and coolant drops present under actual cutting conditions. In experimen-tal tests, reconstructed 3-D geometrical tool images and intensity measurements enabled us to detect the size and the location of the chipped part and to determine the length of flank wear to an accuracy of 40 um.