A new approach to chatter control in milling is presented in this paper. The proof-of-concept control system comprises a tool holder, analog and digital control electronics, and power amplifiers to drive the actuator elements. The active tool holder, designed to impart counter-vibration forces to the milling tool, mounts to existing machines with a standard industrial interface. Sensors and piezoelectric actuators are imbedded in the stationary portion of the tool holder and are therefore fixed relative to the body of the milling machine. The controller operates on the two sensor signals, producing two orthogonal actuator drive signals to oppose resonant tool vibrations induced from the cutting forces. The paper first introduces the fundamental concepts of milling chatter and their relation to the described active system. The actuation, sensing and controller details follow. The influence of the tool holder on system dynamics and cutting stability is also addressed. Cutting test results using a titanium alloy are then described, demonstrating an improvement of a factor of five in surface finish relative to the uncontrolled, chatter-dominated case.