The chestnut is a well-known and important forest product in Korea. The annual production of chestnut is about 100, 000tons and its cultivating area is 80, 000ha. However, the peeling process of outer and inner skins of chestnut is very difficult due to hardness and adhesiveness of chestnut skin. The peeling process of chestnut was operated by manual work and the performance of chestnut peeling machine is very low. The purpose of this study is to develope the prototype of new chestnut peeling system. The hardness of chestnuts was tested with six different drying conditions and its range was from 949$g/mm^2$ to 2, 149$g/mm^2$. The hardness of chestnuts was decresed gradually during the drying process. The chestnut peeling Process includes sorting, storage, drying, outer skin cutting, flame peeling, continuous frictional skin peeling, and inner skin cutting operation. The developed chestnut peeling system consists of outer skin cutter, flame peeler, continuous frictional skin peeler and inner skin cutter. The system can peel domestic chestnuts at 150$kg/hr$ with peeling rate of 78%.