A tool holder includes a shank including a tool holder portion and a central bore for accommodating a cutting tool, and a first shrink fit sleeve disposed about the tool holder portion of the shank. An application of heat to the tool holder causes the tool holder portion and the first shrink fit sleeve to expand outwardly, and the removal of heat will cause the tool holder portion and the first shrink fit sleeve to contract inwardly to rigidly maintain the cutting tool within the tool holder by shrink fit. The tool holder may also include a second shrink fit sleeve disposed about the first shrink fit sleeve to provide increased torque capability.