In this paper, development of a sensor for detecting cutting torque in milling processes is described, and methods for predicting tool wear and detecting tool failure are proposed. The developed sensor detects cutting torque by using magnetostrictive effect. The specific structure to detect cutting torque without influence of axial force and radial force is given and the torque sensor with the proposed structure is developed. Tool wear is predicted according to originally defined specific cutting force that is derived from cutting area and cutting torque. In order to derive cutting area, a mathematical model for milling processes is constructed. Tool failure is detected by observing the peak value of cutting torque caused by each cutting edge.