Yes, since it is essentially burning through the workpiece, some fumes will be produced.  However, the system includes a built in exhaust extraction system with a fine particle filter to reduce the breathable fumes.  It is recommended that you connect the output of the exhaust system to the outside of your work environment using flexible hose or PVC pipe (sold separately).  This will ensure that the fumes are exhausted outside and not within the room your are working in.