A sensorless method for machine tool chatter detection. When the machine tool spindle is running, a spindle motor torque signal is analyzed in the time domain to determine whether a bit is currently cutting a workpiece. When not cutting, an air-cut reference signal is stored for later use. When cutting, the spindle motor torque signal, along with positioning servo motor signals, are converted to the frequency domain and filtered. Filtering steps include removal of the air-cut reference signal via spectral subtraction, removal of spindle harmonic components, removal of artificial peaks due to aliasing effects, and removal of artificial peaks due to encoder error effects. After filtering, indicator criteria are evaluated to detect chatter, including a magnitude of the filtered torque signal for servo data and a magnitude ratio of the filtered torque signal to the air-cut reference signal for spindle data. Corrective action is taken when chatter is detected.