Mainly used for decorative purpose in the textile industry, lace is a type of lightweight, openwork fabric. The process of lace manufacturing is complex but much of it has been highly automated with the advancement of modern technology. One exception is the lace cutting operation which is used to cut the wide lace webs (as wide as 3.8 m) knitted from automatic knitting machines into individual lace breadths. Currently, lace cutting IS carried out by skilled operators or a low speed mechanical cutting system, leading to high cost and increased product lead times. Therefore the lace cutting operation has become a bottleneck of the whole process oflace manufacturing and its automation is highly desired. Based on the combination of machine vision and laser cutting technology, two automatic lace cutting systems have been developed in Loughborough University, which have fully demonstrated the feasibility of replacing the slow and expensive traditional lace cutting methods. However, the edge quality of the lace cut by these systems is not satisfactory enough to meet the requirements of demanding lace markets. In this thesis, based on the investigation of the effect of handling tension on lace cutting edge quality and the microstructure of lace, a strategic lace cutting solution has been presented. The cutting strategy is aimed at tensioning and exposing the loop thread by strategically tensioning and cutting individual threads. The loop thread is considered critical to cutting lace with a high quality finish. To automatically implement the cutting strategy, a machine vision system has been developed. An automatic lace transport and tensioning rig has been designed and manufactured. The long term aim of this rig is to be able to transport and tension lace continuously for lace cutting and apply localised tension on individual threads with the vision system providing feedback for tension control. The work in this thesis has been limited to manual adjustment of the rig to prove the initial ideas for this concept. An integrated vision guided, pulsed laser cutting system for lace cutting has been developed, based on which two types of representative lace have been cut. According to the assessment results of using a combination of user trials, microscopic and newly developed measurement techniques, the lace cut by this newly developed system has shown significant improvement in cutting edge quality, when compared to the lace cut by the previous laser cutting systems.