Using the quality loss function developed by Taguchi, the manufacturing time and cost of a product can be reduced to improve the factory's competitiveness. However, the fuzziness in quality loss has not been considered in the Taguchi method. This article presents a fuzzy quality loss function model. First, fuzzy logic is used to describe the semantic of the quality, and the quality level is divided into several grades. Then the fuzzy quality loss function is developed utilizing the loss in monetary terms, which indicates the quality loss of each quality level and the normalized expected probability to each quality grade. Moreover, a new optimization model for tolerance design under fuzzy quality loss function is established. An example is used to illustrate the validity of the proposed model. The result shows that the proposed method is more flexible and can achieve the balance of quality and cost in tolerance design. It can be easily used in accordance with practical engineering applications.