Cutting tool unknown in AE (3)
I believe the answer is:
axe
'cutting tool' is the definition.
(axe is a kind of cutting tool)
'unknown in ae' is the wordplay.
'unknown' becomes 'x' (algebra).
'in' indicates putting letters inside.
'x' placed within 'ae' is 'AXE'.
(Other definitions for axe that I've seen before include "Cut costs or staff drastically" , "Make redundant" , "Do away with" , "Cutter" , "Eliminate" .)