In recent years, the major reason for the rejection of composite pipes in industrial applications is due to the poor quality of the drilled hole. This paper investigates the effect of drilling process parameters on the hole quality in composite pipes made of an aluminium core surrounded by polyethylene layers. An empirical model is designed for the two input variables using response surface methodology (central composite design). An experimental investigation is carried out to study the effect of spindle speed and feed rate on quality of drilled holes, especially circularity error. It is observed that a moderate spindle speed and low feed rate are most effective in minimizing the circularity error. Microstructural investigation of drilled hole surface is also carried out using scanning electron microscopy (SEM).