Abstract: A machine tool including a tool holder supporting a boring tool and receivable in a tool spindle. A device is provided in the tool holder for adjusting the radial position of the boring tool by utilizing rotation of the tool spindle. A contact detecting head with a known predetermined diameter is secured to the tool holder in co-axial relationship therewith. A contact detecting device detects the contact between a workpiece bore and the contact detecting head. A bore diameter measuring device measures a diameter of the workpiece bore by causing relative movement between the contact detecting head and the workpiece from a first position to a second position wherein at each of the first and second positions the contact detecting head contacts the workpiece, along a path passing through the center of the workpiece bore. The tool spindle is rotated in response to the measuring device to adjust the radial position of the boring tool.