Cutting parameters were evaluated and optimized based on multiple performance characteristics including tool wear and size error of chilled hole. Taguchi's L-27, 3-level, 4-factor orthogonal array was used for the tests. It is shown that generally abrasive wear and built up edge (BUE) formation were seen in the tool wear, and the corner wear was also of major importance. Flank wear of the cutting tool was found to be mostly dependent upon particle mass fraction, followed by feed rate, drill hardness and spindle speed, respectively. Among the tools used, TiAlN coated carbide drills showed the best performance with regard to the tool wear as well as hole size. Grey relational analysis indicated that drill material was the more influential parameter than feed rate and spindle speed. The results revealed that optimal combination of the drilling parameters could be used to obtain both minimum tool wear and diametral error.