In FMS where tool movement policy is adopted, a mathematical model has been developed which determines the selection of a tool type for each operation and tool loading-part assignment simultaneouly. The objective is to minimize the total cost of operation including machining time cost, tool cost, tool replacement and loading time cost, and tool change time cost. Due to the complexity of the problem, an approximate solution procedure has been developed utilizing the special structure of the model. Tool selection was determined first to allocate one tool type to each operation considering more than one tool type alternatives for each operation. Tool loading-part assignment was determined to minimize tile total number of tool changes due to part mix based on the tool selection.