Tool electrode wear in μEDM-drilling is more significant than in conventional EDM-drilling. Due to the longitudinal wear of the electrode, the actual depth of micro-hole does not remain identical with the programmed ‘Z’ axis value. In order to compensate this tool wear, in the present work, a modified ‘volume removal per discharge’ (VRD) approach has been applied in real-time. Instead of measuring tool wear directly, this approach does tool wear compensation by estimating ‘real-time volume removal’ from workpiece. Since VRD doesn’t remain constant with the depth of machining, the proposed VRD approach includes this aspect in the tool wear compensation strategy for estimating ‘real-time volume removal’ more accurately. In addition to the longitudinal wear of the tool electrode, this strategy also considers corner wear and tapering of the tool as well as overcut. For determining VRD more accurately, a pulse discriminating system, developed in-house is used to identify different pulses. The proposed approach has been applied to two different work-tool material combinations and also at two different input machining conditions. The results are compared with the ‘uniform wear method’ (UWM) revealing a noticeable improvement.