This study investigates self-propelled rotary tool (SPRT) performance in hard turning using 3D finite element (FE) models. The FE models developed in this study are based on coupled temperature-displacement analysis using an explicit time-integration scheme. The developed FE models can predict chip morphology, cutting forces, tool and workpiece stresses and temperatures. For model verification, hard turning experiments were conducted using an SPRT on AISI 4340 bars. Cutting forces and maximum tool-chip interface temperatures were recorded and compared with the model findings. The effects of different process parameters were analyzed and discussed using the developed FE models. The FE models were run with a central composite design (CCD-25) matrix with four input variables, i.e., the cutting speed, the feed rate, the depth of the cut and the inclination angle. Response surfaces based on the Gaussian process were generated for each performance variable in order to predict design points not available in the original design of the experiment matrix. An optimization study was carried out to minimize tool stress and temperature while setting limits for the material removal rate (MRR) and specific cutting energy for the process. Optimized processes were found with moderate cutting speeds and feed rates and high depths of cut and inclination angles.