The Ti(C,N)-(W,Ti)C-TiSi2 gradient cermet tool (GT5) fabricated by vacuum hot pressing sintering was used for continuous dry turning of 17-4PH stainless steel at different cutting speeds, and its cutting performance and crack-healing mechanisms were explored in comparison with those of Ti(C,N)-(W,Ti)C-TiSi2 homogeneous cermet tool (TWS20) and Ti(C,N)-(W,Ti)C homogeneous cermet tool (TW15). The results showed that the wear resistance and cutting performance of the GT5 tool were significantly better than those of TWS20 and TW15 tools. At the cutting speed of 150 m/min, the tool life of the GT5 tool was approximately 1.32 times and 2 times that of TWS20 and TW15 tools, respectively. Flank wear, crater wear, chipping and tool material flaking were the main failure modes of the GT5 tool. The main wear mechanisms of the GT5 tool were adhesive wear, oxidative wear and slight abrasive wear, of which oxidative wear was conducive to crack-healing. The contributions of gradient structure to the residual compressive stress, hardness and toughness of its surface layer tool material and the strengthening of tool material by crack-healing mechanisms were responsible for better cutting performance of the GT5 tool. During the dry cutting, the thermal cracks were repaired and filled by the particle TiO2 and glass phase SiO2 generated from the oxidation reaction of TiSi2 and a small amount of WSi2. In addition, the crack tip was passivated by glass phase oxides, which contributed to inhibition of crack propagation and avoidance of tool material flaking. It was confirmed that the crack-healing mechanism could improve the cutting performance and prolong the tool life.