The ceramic cutting tool requirements for metal machining are reviewed, taking into account the trends in industry towards dry high-speed cutting and the need for tools with complex geometry. The emphasis will be on bulk materials rather than on coatings and most attention will be devoted to machining of iron-based alloys (steels). In the development of new tool materials, special attention should be given to the chemical matching of tool and workpiece material at elevated temperatures. The chemical compatibility of the tool-workpiece combination can be investigated by means of static interaction couples at elevated temperatures, which have been exposed for times long enough to be able to characterise the interaction layer. Complementary to the experimental investigation, the chemical compatibility of tool and workpiece materials can be predicted from thermodynamic equilibrium solubility calculations of tool materials in a selected workpiece material. Taking into account the mechanical properties needed, new ZrO2-based composites were defined based on the thermodynamically estimated chemical stability. The selection, development and proof testing of the new ZrO2-based composites is highlighted and their wear behaviour and performance in high speed dry turning of construction steel is compared with that of state-of-the-art cutting tool materials.