An improved toolholder assembly and method is provided that comprises an adjustable nozzle for redirecting a liquid coolant stream from a direction generally parallel or slightly oblique with respect to the axis of rotation of a workpiece to a direction that is substantially orthogonal with respect to this axis. The nozzle assembly includes a threaded base on one end and a nozzle head on the other, and the threaded base may be screwed into or out of a threaded opening in the toolholder body which communicates with the original coolant stream opening in order to adjust the nozzle head at both a desired angle in a plane orthogonal with respect to the axis of rotation of the workpiece, as well as at a desired point along this axis. The invention is particularly useful in combination with toolholders having cutting inserts that perform deep grooving, threading, and cut-off operations, as the angular and axial adjustment features of the nozzle assembly allow the nozzle head to project a stream of coolant that is optimally orthogonally positioned with respect to the interface between the cutting insert and the workpiece regardless of the depth of the cut and for a variety of cutting inserts. Such optimal positioning in turn optimizes the ability of the coolant stream to lubricate the cutting interface and to remove heat and metal chips at all times during the cutting operation of the insert.