A systematic optimization method for generating the tolerance chart of a machining part and a computer program to implement this method have been developed. The developed method consists of four major components: the representation scheme for the machining sequence of the part, the algorithm for the identification of tolerance chains, the optimization model for tolerance allocation, and the calculation technique for working dimensions. The tree representation is utilized for capturing the relationships of the machining sequence. Based on this representation scheme, an automated algorithm for identifying the tolerance chains of blueprint dimensions and stock removals is developed. The optimization model consists of two stages: primary and secondary tolerance allocation. The primary stage deals with the optimization of the tolerances of the working dimensions affecting the blueprint dimensions, while the secondary stage deals with the optimization of those tolerances affecting the stock removals. For calculating the working dimensions, a new method is developed to determine the signs of the working dimensions in the tolerance chains automatically. The software is developed using the C programming language. The computerized optimization method has been tested on two examples. In both cases, better results were found when compared to those obtained by a manual method or other optimization approaches.