Electric Discharge Machining (EDM) is essential for shaping and cutting tool steel. EDM’s precision in machining difficult materials and tool steel characteristics are well known. EDM efficiency requires reliable performance measurement parameters. The physical shape and mobility of the electrode tool are critical in EDM research. Layer machining is an advanced method that removes material in a sequential manner to produce intricate 3D shapes in tool steel and several other materials. The improvement in layer machining methods with precise toolpath algorithms, adaptive layer thickness management, and real-time monitoring systems is required to maximize precision and efficiency. Response surface methodology, the artificial neural network, and other techniques are necessary to optimize EDM operations and maximize performance. Many researchers experimented with electrode shapes and movement patterns to enhance the removal of material and the quality of surfaces. Investigation of complex electrode structures and innovative tool path strategies has been performed in previous studies. It was very difficult to consider various factors during the EDM operation; hence, the present review summarizes the positive outcomes of previous research. The review emphasizes optimizing pulse duration and discharge current to improve EDM efficiency. The present comprehensive review discusses research on EDM in three main areas: electrode tool geometry and motion, tool steel layer processing, and factors for measuring EDM performance. The objective of the present review is to focus on measuring material removal rates, surface roughness, tool wear, and energy usage. The present review concludes that EDM is crucial to machining tool steel and cutting tool materials. Integrating and hybrid machining technologies can improve performance, and improved optimization techniques are crucial. It also recognizes knowledge gaps and explores new frontiers in this dynamic field.