Development of microstructure in chips during machining of Grade 2 titanium at different cutting speeds has been investigated. The morphology of the chip changes from continuous chip to irregular and regular segmented chip with increasing cutting speed. The deformation in continuous and segmented chips is characterized as continuous and localized shear respectively. The deformation mechanism in the irregular segmented chip is the dislocation slip in the continuous region and twinning around the localized shear. Deformation twinning was observed inside the segment between the shear bands in the regular segmented chip. These deformation twins are responsible for the hardening inside the segment.