A power tool cooling system comprises a cooling fan disposed on a motor in a position between the upper field coil and the lower commutator. A transmission housing encapsulates the transmission mechanism. During operation, the fan is driven by the motor and draws air axially through the motor and expels the air radially outwardly through holes in the outer housing of the motor. This causes air to be drawn in through the air vents formed on the top of a tool housing, in the side of the housing and between the housing and a battery pack. The cool air flows outside of the transmission housing, but inside the tool housing such that air does not pass through the transmission mechanism. A plurality of motor openings are also formed in the outer housing of the motor to enable cool air to pass into the motor to cool the motor.