The work aims to optimize process parameters of silicon wafer dicing and improve dicing quality. A new method of step cut process was proposed. With a self-developed precision full-automatic dicing machine, influences of such process parameters as spindle speed, feed speed and cutting depth on processing properties of step cut and traditional single cut were studied by performing single factor experiment. Chipping width, relative kerf width and kerf surface roughness were tested. Cutting forces were indirectly reflected by measuring the spindle current in the dicing process. Finally, optimization experiment was applied to step cut process, and the optimum combination of process parameters was obtained. With the increase of dicing depth, the spindle current increased. Feed speed had slight influence on spindle current. Step cut could effectively reduce the cutting forces generated during dicing and improve the dicing effects. Step cut test showed that: the relative kerf width increased as spindle speed increased, and first decreased and then increased as the feed rate increased, the minimum relative kerf width was 1.048 at the feed speed of 15 mm/s and spindle speed of 10 000 r/min; the chipping width decreased as spindle speed increased, and increased as feed speed increased, and minimum chipping width was 5.31 μm at the feed speed of 1 mm/s and spindle speed of 25 000 r/min. Compared with the traditional single cut method, step cut can achieve better dicing effects, reduce chipping width, the relative kerf width and micro-cracks to a certain degree, and improve cutting quality.