An collet and lock nut assembly includes a collet for receiving a cutting tool shank and a lock nut for creating a gripping force between the collet and the shank. The collet has a nose portion and a body portion separated by an annular groove. The lock nut has a plurality of retention tabs and a corresponding number of clear portions. The collet and lock nut assembly can be easily assembled by inserting at least one retention tab within the groove of the collet, and then applying pressure to the collet such that the remaining retention tabs of the lock nut are received within the groove of the collet to place the assembly in a locked position. The collet and cutting tool shank can be drawn from the tool holder by applying rotational torque to the lock nut. The collet is easily removed from the lock nut by applying pressure in any circumferential, lateral direction against the collet.