The mechanism of shrink fit toolholder has been analyzed through theoretical modeling and finite element modeling. The performance of shrink fit toolholder mainly depends on the interference value that provides enough clamping force. Interference value between tool and shrink fit toolholder includes two separate parts named as initial interference and compensatory interference. Both types of interference and their related influencing factors are described firstly in this paper. The theoretical model for shrink fit toolholder is then developed. Finally, finite element method analysis is carried out to verify the developed theoretical model. The centrifugal force and environment temperature generated in machining process should be specially paid more attention to as the spindle rotation speed grows faster.