This paper presents a new method to embed microthin film sensors into metallic structures by diffusion bonding. The experiments were carried out using AISI 304 stainless steel substrates with a bonding temperature of and a pressure of 4 MPa, which the developed thin film system was able to sustain. The success of embedding was validated by sensor functionality tests and metallurgical characterization. This sensor embedding method can be extended to other engineering metallic materials. To demonstrate the applications of the embedded microsensors, a PdCr thin film strain gauge array that is suitable for in situ measuring of temperatures and strains in manufacturing processes was designed and fabricated for testing in the vertical end milling process. Time- and spatial-resolved signals were obtained during the milling process. The signals were decomposed to a static part, which apparently resulted from temperature changes, and the dynamic part, which resulted from dynamic strains induced by material removal during cutting. The milling tests demonstrated the ability of using this method to measure real-time temperatures and strains within the workpiece, which will be very valuable to the fundamental understanding of various manufacturing processes. It can also be used for bench marking numerical modeling and simulations.