Ultrasonic-assisted turning (UAT) is a hybrid machining method that improves difficult-to-cut materials’ machinability and surface integrity. Minimum quantity lubrication (MQL) is a cooling condition employed in metal cutting operations to improve machining performance and environmental sustainability. This article presents the experimental investigations on the effect of machining and vibration parameters and cooling conditions on the surface roughness (Ra), flank wear (Vb), and surface hardness (HV) during UAT of AISI D2 tool steel. Experiments were designed based on L36 orthogonal array. Two levels of spindle speeds, feed rates, depth of cut, and three levels of percentage intensity of ultrasonic power (PIUP) were employed, and two cooling conditions, like dry and MQL. Analysis of variance (ANOVA) was used to find the significant input parameters that affect each response. ANOVA output revealed that feed rate was the most influential factor on Ra, the PUIP is the dominant factor on HV, and spindle speed is the significant factor on Vb. Optimisation is performed to find optimal parameters as per Taguchi multi-response method. The optimal parameters are 450 rpm spindle speed, 0.05 mm/rev feed rate, 0.1 mm depth of cut, 100 PIUP and MQL cooling resulted in minimum surface roughness of 0.439 μm, maximum hardness of 283 HV and minimum flank wear of 168 μm. Flank wear morphology results showed that abrasion and chipping are the tool wear mechanism in dry UAT, whereas minor abrasion alone was found in MQL UAT compared to CT. Chip morphology study showed that UAT produced continuous spiral-type chips under both cooling conditions compared to CT. A novel design approach is implemented to design the UAT tool. Along with the UAT tool, MQL is also given to improve the machinability of D2 tool steel. This UAT tool can machine intricate metals with a critical cutting velocity of less than 75.4 m/min.