Innovations in self-lubricating cutting inserts have positioned dry machining as an attractive manufacturing technology with minimal environmental footprint. Here, a novel self-lubricating ceramic cutting insert was developed by the incorporation of 10 wt% molybdenum (Mo) in zirconia toughened alumina (ZTA) by pressure-less sintering. Detailed characterization revealed the role of Mo as a toughening reinforcement, and an improvement around 5–10% in fracture toughness over monolithic ZTA was observed. Response surface methodology was utilized to optimize the machining parameters to achieve minimum cutting forces and minimum surface roughness of the finished job. Temperatures encountered during the high-speed turning of AISI 4340 steel led to the formation of thin, lubricating tribo-films of Mo oxides (MoO 2 and MoO 3) at the tool-job interface. The self-lubricating characteristics of the developed insert successfully resisted abrasion, and led to a usable tool life that was 11% greater than prevalent commercial cutting tools.