A graded ceramic tool material was fabricated by hot-pressing. Its cutting performance and failure mechanisms were investigated in dry face milling of Inconel 718 using round inserts at ultra high speeds ranging from 500 to 1600 m/min. The results showed that the microscopic chip shape was serrated type and the minimal cutting force was obtained at 900 m/min under this ultra high speed cutting conditions. Due to the enhanced mechanical properties and higher fracture resistance, the graded tool showed a self-sharpening characteristic. And the notch wear resistance of the graded tool was higher than that of the common reference tool under the same cutting condition. The failure mechanisms involved chipping, flaking, abrasive wear and adhesive wear. The mechanisms responsible for the higher cutting performance of the graded tool were determined to be the higher mechanical properties. The understanding of the failure mechanisms in ultra high speed milling processes can provide the guidance for the proper application of the tools, furthermore the guidance for tool materials design.