Tolerance design has become a very key issue in product and process development because of an informal compromise between functionality, quality, and manufacturing cost. The problem formulation becomes complex with simultaneous selection of design and manufacturing tolerances and the optimization problem is difficult to solve with the traditional optimization techniques. In this paper, a recently developed optimization algorithm called teaching-learning-based optimization (TLBO) is used for optimal selection of design and manufacturing tolerances with an alternative manufacturing process to obtain the optimal solution which is nearer to global optimal solution. Three problems are considered and these are: overrunning clutch assembly, knuckle joint assembly with three arms, and a helical spring. Out of these three problems, the problems of overrunning clutch assembly and knuckle joint assembly with three arms are multi-objective optimization problems and the helical spring problem is a single-objective problem. The comparison of the proposed algorithm is made with the genetic algorithm (GA), Non-dominated sorting genetic algorithm-II (NSGA-II), and multi-objective particle swarm optimization algorithm (MOPSO). It is found that the TLBO algorithm has produced better results when compared to those obtained by using GA, NSGA-II, and MOPSO algorithms.