The furniture manufacturing sector faces significant challenges in machining composite materials, where quality issues such as delamination can lead to substandard products. This study aims to improve the classification of drilled holes in melamine-faced chipboard using Explainable AI (XAI) techniques to better understand and interpret Convolutional Neural Network (CNN) models’ decisions. We evaluated three CNN architectures (VGG16, VGG19, and ResNet101) pretrained on the ImageNet dataset and fine-tuned on our dataset of drilled holes. The data consisted of 8526 images, divided into three categories (Green, Yellow, Red) based on the drill’s condition. We used 5-fold cross-validation for model evaluation and applied LIME and Grad-CAM as XAI techniques to interpret the model decisions. The VGG19 model achieved the highest accuracy of 67.03% and the lowest critical error rate among the evaluated models. LIME and Grad-CAM provided complementary insights into the decision-making process of the model, emphasizing the significance of certain features and regions in the images that influenced the classifications. The integration of XAI techniques with CNN models significantly enhances the interpretability and reliability of automated systems for tool condition monitoring in the wood industry. The VGG19 model, combined with LIME and Grad-CAM, offers a robust solution for classifying drilled holes, ensuring better quality control in manufacturing processes.