The present research work aimed to study the effects of cutting environments and conditions on tool wear and residual stresses induced by orthogonal cutting of AA6061-T6. Cutting environments included dry- and flood-coolant modes and cutting conditions consisted of cutting speed and feed rate. A 2D finite element (FE) model was developed to predict tool wear and residual stresses and was validated by experimental measurements including machining forces, tool wear, and residual stresses. This was obtained by exploring various magnitudes of the shear friction factor and heat transfer coefficient and choosing proper coefficients using the calibration of the predicted results with the measured ones. The experimental results showed that the effect of cutting environment including dry and flood-coolant modes was negligible on machining forces. The experimental investigation also demonstrated that increasing feed rate raised machining forces, tool wear and residual stresses in both cutting environments. Low Speed Cutting (LSC) led to the highest value of tool wear and High Speed Cutting (HSC) provided the lowest values of resultant machining forces and residual stresses in both modes. Flood-coolant mode reduced tool wear and slightly decreased tensile residual stresses in comparison with dry mode. As a result, low feed rate and high-speed cutting under flood-coolant mode were proposed in order to improve tool wear and residual stress in orthogonal cutting of AA6061-T6.