For an air cooling system that is applied in dry machining, the thermodynamic properties of cold compressed air have an important influence on the cooling of the cutting region. In this study, the air cooling system of the dry cutting machine tool is mathematically modeled and analyzed in terms of the exergy and economic aspects of the system design and component selection. With the exergy analysis of system components, the relations between system components parameters and thermodynamic properties of compressed air are obtained. The exergy functions are verified to be acceptable for industrial application by comparing measured values with calculated values of the thermodynamic properties of cold compressed air. A multi-objective optimization process is carried out using GA (genetic algorithm) combined with the Euclidean technique and the TOPSIS (technique for order preference by similarity to ideal solution) decision-making method. Exergetic efficiency and total cost rate of the air cooling system are the objectives, while the thermodynamic properties of cold compressed air supplied to the cutting region are the constraints. The results show that an optimum solution with an exergetic efficiency of 55.1% and total cost rate of 9.37 x 10(-4) US$/s is achieved. Furthermore, air compressor, aftercooler, and air refrigerator are the components with the highest exergy destruction rate and capital cost, and have great potential for further improvement.