Mechanism of chip formation during dry machining of Ni-based super alloys needs considerable research attention as it directly or indirectly affects different aspects of machinability. Therefore, the present research work aims at understanding the mechanism of chip formation with the help of various chip characteristics during dry machining of Inconel 825, a nickel-based super alloy. The influence of multilayer coating deposited using chemical vapour deposition, cutting speed and machining duration has been investigated on types and form of chips, along with different characteristics of chip like shear band thickness, saw-tooth distance, equivalent chip thickness, saw-tooth angle and chip segmentation frequency. Chip–tool contact length, hardness and crystallographic orientation (through X-ray diffraction) of chip have also been studied. Furthermore, different machining characteristics such as cutting force, apparent coefficient of friction and cutting temperature have also been determined for explaining the mechanism of various aspects of chip formation. The results indicated that coated tool restricted sharp increase in shear band thickness with cutting speed and resulted in reduction in saw-tooth distance, saw-tooth angle, equivalent chip thickness, chip hardness and deformation on grains while exhibiting increase in chip segmentation frequency in comparison with its uncoated counterpart.