In this study, a monitoring method to detect chip disposal state in drilling system based on neural network was proposed and its performance was evaluated. If chip flow is bad during drilling, not only the static component but also the fluctuation of dynamic component of drilling. Drilling torque is indirectly measured by sensing spindle motor power through a AC spindle motor drive system. Spindle motor power being measured drilling, four quantities such as variance/mean, mean absolute deviation, gradient, event count were calculated as feature vectors and then presented to the neural network to make a decision on chip disposal state. The selected features are sensitive to the change of chip disposal state but comparatively insensitive to the change of drilling condition. The 3 layerd neural network with error back propagation algorithm has been used. Experimental results show that the proposed monitoring system can successfully recognize the chip disposal state over a wide range of drilling condition even though it is trained under a certain drilling condition.