In the near future, the foreseen improvement in machine tools will be in the form of a knowledge evolution-based intelligent device. The goal of this study is to develop intelligent machine tools having knowledge-evolution capability in Machine to Machine (M2M) wired and wireless environment. The knowledge evolution-based intelligent machine tools are expected to be capable of gathering knowledge autonomously, producing knowledge, understanding knowledge, applying reasoning to knowledge, making new decisions, dialoguing with other machines, etc. The concept of the knowledge-evolution intelligent machine originated from the process of machine control operation by the sense, dialogue and decision of a human expert. The structure of knowledge evolution in M2M and the scheme for a dialogue agent among agent-based modules such as a sensory agent, a dialogue agent and an expert system (decision support agent) are presented in this paper, and work-offset compensation from thermal change and recommendation of cutting condition are performed on-line for knowledge-evolution verification.