A tool compensation system for adjusting parameters of a tool includes a controller and a selecting module. The controller includes a storing module, an invoking module, and a compensation module. The storing module is configured for storing serial numbers and data tables of a first and a second tools. Each data table of the first and second tools includes a plurality of first dimensional parameters and a plurality of second dimensional parameters. The selecting module is capable of selecting a tool for machining by selecting the serial number of the tool. The invoking module is configured for invoking the second dimensional parameters according to the first dimensional parameters of a tool selected by the selecting module. The compensation module is configured for adjusting machining parameters of the selected tool according to the second dimensional parameters.