Microstructure of machined copper chips at very low velocity was characterized by transmission electron microscopy. The structure of the machined chip produced by reasonable combinations of machining parameters is virtually entirely occupied by isolated equiaxed submicron grains of 100~300nm in size with high-angle boundaries. A finite element model was developed to study large plastic deformation in plain orthogonal machining copper. The numerical results show most of the grain refinement associated with the formation of ultra-fine grained chip may be attributed to the large shear strain imposed in the deformation zone. It is feasible to take machining process as a method of preparing ultra-fine grained materials. But the optimal design of the machining process requires a precise and quantitative understanding of the mechanics of deformation-induced subgrain microstructure.