This study proposes a new explanation of how tool wear is reduced during powder-mixed micro electrical discharge machining. Owing to its lower discharge energy than a transistor discharge circuit, an RC discharge circuit outperforms in micro EDM. Given that the energy distribution of a cathode is lower than that of an anode during discharge, a tool is negatively charged to reduce tool wear and increase the material removal rate. However, due to the stray inductance of an RC discharge circuit, the tool polarity and direction of the current fluctuate before the discharge plasma channel is extinguished, which increases the tool wear. In this study, it was found that graphite powder in a dielectric fluid disperses the charged energy into several small discharge plasma channels. These small channels were extinguished quickly before the tool polarity and direction of the current fluctuate; which decreases the amount of tool wear. The machining time and tool wear length in powder-mixed micro ED-drilling were evaluated with various particle diameters and concentrations of powder-mixed dielectric fluid. With the optimal tool feeding conditions, the machining time and tool wear length of graphite-powder-mixed kerosene were reduced by 30.9% and 28.3%, respectively, as compared to those in non-powder-mixed EDM.