Abstract: A tool holder is disclosed having a body adapted to be rotatably driven about an axis. The body includes an axial bore at one end which is adapted to receive the cylindrical shank of a cutting tool. A radial bore in the body receives a threaded fastener which, upon tightening, abuts against the cutting tool shank to secure the shank to the tool holder body. A pair of alignment members are adjustably secured to the body and each alignment member has an alignment surface which is substantially tangent to the axial bore whereas each alignment member is shaped so that the radial distance between the alignment surface on the alignment member and the axis of the tool holder varies in dependence upon the position of the alignment member. Adjustment of the alignment members and fastener centers the cutting tool to the tool holder.