Abstract To understand the wear mechanism of diamond tool in machining of ferrous metals, an erosion test simulating wear process and ab-initio molecular orbital calculation are carried out. The results of the tests and analyses show that the essential wear mechanism at the temperature higher than 1000K is the dissociation of carbon atoms on diamond surface due to the interaction with iron surface. The wear rate is controlled by the removal rate of dissociated carbon atoms from the tool-work interface such as diffusion into workpiece. At the temperature lower than 900K, the mechanism involves the removal of carbon atoms due to oxidization of diamond accompanied with deoxidization of iron oxide.