Microstructure and chip formation were evaluated during the step shoulder down-milling of Ti-6Al-4V using a water-miscible vegetable oil-based cutting fluid. Experiments were conducted using the Cut-list fluid supply system previous developed by the authors and a conventional cutting fluid supply system. A thin plastically deformed layer below the machined surface was observed during the metallurgical investigation of the surfaces produced using both systems. Despite noticeable reductions in cutting fluid consumption achieved by Cut-list, no significant disparity was found in microstructural damage. The microstructure of the machined surfaces was strongly affected by cutting speed and fluid flow rate with a discontinuous serrated chip being the principal type. However, increases in cutting fluid flow rate associated with increased cutting speed significantly changed chip morphology where average distance between chip segments increased with cutting speed. Cut-list produced smaller saw-tooth height and larger segmented width, while the transition from aperiodic to periodic serrated chip formation was governed by cutting speed and feed rate. Chip segmentation frequency and shear angle were also sensitive to cutting speed.