Vibration assisted nano-impact-machining by loose abrasives (VANILA) is a novel target specific nano-abrasive machining process wherein, nano-abrasives, injected in slurry between the workpiece and the vibrating atomic force microscope probe, impact the workpiece causing nanoscale material removal. In this study, a molecular dynamics (MD) based simulation approach is used to investigate the tool wear mechanism. The simulation results reveal that the tool wear is influenced by the impact velocity of the abrasive grains and the effective tool tip radius. It is seen that based on the process conditions, the wear process could happen through distinctive mechanisms such as atom-by-atom loss, plastic deformation, and brittle fracture. Experimental results show evidences of tool wear by aforementioned mechanisms in VANILA process.