The cylindrical shank of a rotatable tool is retained in the cylindrical bore of a tool holder by a retainer that engages an annular groove on a portion of the shank of the tool that extends outward of the rear surface of the tool holder. The tool has an axial bore in the distal end of the shank. The retainer has a pair of spaced ridges that engage the annular groove on the shank and a panel that extends across the distal end of the shank. The retainer is held in place by a pin extending through the panel and into the bore in the distal end of the shank.