A key cutting machine includes a cutter wheel, a key follower and a key positioning fixture for retaining a master key and a key blank in defined positions. Longitudinal and lateral displacement elements displace the cutter wheel and the key blank relative to each other. First and second electronic position sensors generate cutter wheel longitudinal and lateral position signals which electrically define the position of the cutter wheel relative to the key blank blade. A mode control system selectively operates the key cutting machine in either an analog mode where the bit notch pattern of a master key is mechanically traced and duplicated in the key blade blank or in a digital mode in which an electronically defined bit notch pattern is electrically duplicated in the key blank blade without reference to or tracing the master key bit notch pattern.