The machining process is very important in many engineering applications. In high precision machining, surface finish is strongly correlated with vibrations and the dynamic interactions between the part and the cutting tool. Parameters affecting these vibrations and dynamic interactions, such as spindle speed, cut depth, feed rate, and the part’s material properties can vary in real time, resulting in unexpected or undesirable effects on the surface finish of the machining product. The focus of this research is the development of an improved machining process through the use of active vibration damping. The tool holder employs a high-bandwidth piezoelectric actuator with an adaptive positive position feedback control algorithm for vibration and chatter suppression. In addition, instead of using external sensors, the proposed approach investigates the use of a collocated piezoelectric sensor for measuring the dynamic responses from machining processes. The performance of this method is evaluated by comparing the surface finishes obtained with active vibration control versus baseline uncontrolled cuts. Considerable improvement in surface finish (up to 50%) was observed for applications in modern day machining.