Real time monitoring of exit burr formation is critical in manufacturing automation. In this paper, acoustic emission (AE) was used to detect the burr formation during drilling. By using wavelet transform (WT), AE data were compressed without unnecessary details. Then the transformed data were used as selected features (inputs) of a back-propagation artificial neural net (ANN). In order to validate the in process AE monitoring system, both WT-based ANN and cutting condition (cutting speed, feed, drill diameter, etc.) based ANN outputs were compared with experimental data.