Friction stir welding is a solid state welding process that uses a rotating tool to amalgamate two metals by the frictional heat generated. Recent developments in FSW of aluminium have been exploited in aerospace, marine and transport industries. The friction stir welding on aluminium metal generates heat which has detrimental effects on the system in the long run. The heat generated, due to the friction developed, has to be reduced to provide a constant thermal environment for the tool and the workpiece. This work focuses on the conception to develop a water cooled tool holder to reduce the excess temperature thereby protecting the spindle bearing. The current paper elucidates on the design and parameters of water cooled tool holder and spring loaded seal, its implementation and the results obtained by friction stir welding of aluminum.