Automation and optimization of the manufacturing processes play an important role in enhancing productivity. For this, monitoring and diagnostic systems are becoming increasingly necessary to asses the response of materials in manufacturing. In this paper, acoustic emission (AE) sensing was employed for on-line detection of workpiece status and to improve the process stability and workpiece quality by minimising associated defects. Drilling trials were conducted on Woven glass fabric/Epoxy with High Speed Steel (HSS) drills to determine the relationship between AE rms and cutting parameters. The variation of AE rms and power are in close correlation to the flank wear and hole shrinkage. The experimental results show that AE is very sensitive to the response of the drilling environment.