This paper presents a novel approach to measure the cutting temperature in process and control it to some extent by using an internally cooled smart cutting tool with a closed internal cooling circuitry. Numerical modeling based on the finite element analysis-computational fluid dynamics (CFD) method is carried out by using ansys and fluent, then the surface temperature distribution of the tool is fitted and the equivalent heat transfer coefficient of the tool surface contacting with cooling fluid is computed. Analytical thermal model of the tool is established based on the lumped parameter method. Theoretical analysis and numerical simulation results are in good agreement, which demonstrate that the innovative smart tooling design concept can effectively sense the cutting temperature at the cutting tool tip in process and also be used to reduce and control the critical cutting temperature in cutting zone for adaptive machining of difficult-to-machine materials, such as titanium and Inconel alloys. Experimental cutting trials are carried out to further examine and validate the method and concept of applying the smart cutting tool system.