This research aims to design and test the intelligent tool storage system with integration of RFID and Arduino specially manufactured for lathe workshop environments. Primary objective to be achieved was to automate the tool identification, access control and record keeping by reducing human error and increasing efficiency with cost effective and easily reproducible system. Developed system uses passive RFID tags attached to tools and reader module attached with cabinet for tool identification and Arduino used as control unit. Experimental testing was conducted and result demonstrated 94% reading efficiency and reduction of up to 90% on tool retrieval time compared to traditional methods. This research shows system’s reliability and effectiveness with such low-cost RFID and Arduino based automated tool management system.