Fracture reduction tool is disclosed for use with a guide wire for reducing a bone fracture. The guide wire is of a uniform diameter and has a beaded end for placement into the medullary canal. The tool includes an elongated hollow shaft which can be passed into the medullary canal of the fractured bone through an entry hole prepared in the bone. The shaft has a bore along its length through which the guide wire can selectively pass. The shaft and/or the guide wire can be manipulated into and within the respective medullary canal portions of the fractured bone by translational and/or rotational movements so as to reduce the fracture. The tool also includes a measurement sleeve which moves over the shaft and provides a determination of the length of a nail to be inserted into the medullary canal of the reduced bone. A handle for the proximal end of the shaft allows for ease in manipulation of the shaft and guide wire. Locking mechanisms to secure the measurement sleeve and guide wire in position relative to the shaft are also provided.A method of operation with the fracture reduction tool of the present invention is also disclosed.