To overcome difficulty in machining of a ferrous material with a diamond tool, a new coolant system named ‘ion-shot coolant system’ was developed utilizing ELID (Electrolytic In-process Dressing) electrolytic coolant and nanometer size carbon particles. A series of experiments conducted to show effects of the ion-shot coolant system on high carbon chromium steeel workpieces with single crystal diamond tools. Experimental results exhibited that the ion-shot coolant system maintained a sharp cutting edge and in turn, stable cutting force and improved surface quality. Furthermore, stable chip formation was observed under new coolant system. All results were compared with cutting under conventional kerosene mist supply.