In order to inspect burr geometry and hole quality in micro-drilling processes, a cost-effective method using an image processing and shape from focus (SFF) methods on the machine tool is proposed. A CCD camera with a zoom lens and a novel illumination unit is used in this paper. Since the on-machine vision unit is incorporated with the CNC function of the machine tool, direct measurement and condition monitoring of micro-drilling processes are conducted between drilling processes on the machine tool. Stainless steel and hardened tool steel are used as specimens, as well as twist drills made of carbide are used in experiments. Validity of the developed system is confirmed through experiments.