This paper presents the development of an auto-tuning servo system using MATLAB for the on-line adaptive tuning of a DSP-controlled BLDC servo drive. A practical auto-tuning scheme employing minimizing a defined cost function of the process under control has been proposed and realized. Using the developed auto-tuning scheme, the control parameters can be tuned to reach an optimal performance with large parameter uncertainties and load disturbances. The proposed auto-tuning algorithm has been realized using MATLAB and an on-line DSP-controlled BLDC servo drive. Experimental results show the proposed auto-tuning servo drive can achieve good performances with unknown motor parameters.