Coolants are cutting fluids designed to reduce the effects of heat in the machining operation. They have a limited effect on the amount of heat energy generated in cutting; instead, they carry away the heat that is generated, thereby reducing the temperature of tool and workpiece. This helps to prolong the life of the cutting tool. The capacity of a cutting fluid to reduce temperatures in machining depends on its thermal properties. Specific heat and thermal conductivity are the most important properties. Water has high specific heat and thermal conductivity relative to other liquids, which is why water is used as the base in coolant-type cutting fluids. These properties allow the coolant to draw heat away from the operation, thereby reducing the temperature of the cutting tool.

Lubricants are usually oil-based fluids (because oils possess good lubricating qualities) formulated to reduce friction at the tool–chip and tool–work interfaces. Lubricant cutting fluids operate by extreme pressure lubrication, a special form of lubrication that involves formation of thin solid salt layers on the hot, clean metal surfaces through chemical reaction with the lubricant. Compounds of sulfur, chlorine, and phosphorus in the lubricant cause the formation of these surface layers, which act to separate the two metal surfaces (i.e., chip and tool).These extreme pressure films are significantly more effective in reducing friction in metal cutting than conventional lubrication, which is based on the presence of liquid films between the two surfaces.

Lubricant-type cutting fluids are most effective at lower cutting speeds. They tend to lose their effectiveness at high speeds (above about 120 m/min [400 ft/min]) because the motion of the chip at these speeds prevents the cutting fluid from reaching the tool – chip interface. In addition, high cutting temperatures at these speeds cause the oils to vaporize before they can lubricate. Machining operations such as drilling and tapping usually benefit from lubricants. In these operations, built-up edge formation is retarded, and torque on the tool is reduced.