Every woodworker eventually builds a tool wall. The question is whether you build it on purpose or whether you just let it happen.
The accidental version: pegboard from a garage sale, hooks in whatever hole is nearby, tools that fit on hooks on the wall and everything else on the bench or leaning against the cabinet leg. It works the same way a pile of lumber in the corner is technically a stacking system. Technically.
The problem isn't the mess. The problem is that every time you reach for a tool and have to think about where it is, you've paid a small tax on your attention. Small taxes compound.
Three orbits
Not all tools have the same relationship to the work. Build storage that treats them the same way and it serves none of them well.
Think in three orbits.
The bench. Tools at arm's reach while you're working: the chisel you're currently using, the mallet, the marking gauge set to your current dimension, the combination square, a pencil. That's about it. The bench orbit is small by design. Anything on the bench that isn't being used is in the way.
The wall. Tools you reach for constantly but don't need sitting on the bench: hand planes, handsaws, the full chisel set, marking tools, most measuring tools. These are on the wall, in one place, always. You reach for them without looking after about two weeks.
The cabinet. Tools you use seldom enough that they don't deserve wall space, or tools that need protection from dust and impact: specialty planes, router planes for specific joinery, drills and drivers, bits and blades. Drawers. Closed doors. Out of the way, organized, findable.
The governing rule: the wall should hold everything you use most sessions. If something on the wall hasn't moved in two months, it belongs in the cabinet. The wall is not a museum of tools you might someday need.
Use French cleat
No suspense here: it's French cleat. Not pegboard.
Three-quarter inch plywood ripped at 45 degrees into strips, mounted horizontally, bevel facing out and up. Holders, hooks, and brackets catch on the cleat and hang from it. You can add a holder, move a holder, or rearrange the whole wall without any tools in about thirty seconds per piece.
Pegboard holes are a fixed grid. If your chisels want to live on the right side of the wall and the right spot doesn't line up with the hole pattern, you compromise. French cleat doesn't care. The holder goes where you want it.
Pegboard hooks pull out. Plywood holders built for French cleat won't come off without being deliberately lifted. The tools stay where you put them.
Build is simple: rip strips on the table saw, screw them to the studs 3 to 4 inches apart. Build the holders from plywood offcuts. Start with a flat shelf with a stop. Specialize from there. The whole wall can go up in an afternoon, and you'll be moving things around for months as you figure out your patterns. That's fine. That's the point.
What doesn't go on the wall
Precision instruments.
Your combination square lives in a drawer or a fitted case. Same with marking gauges and any marking knife with a delicate edge. These tools are wrecked by two things: dust and impact. A combination square left open to a shop where you're planing or running a router is collecting abrasive dust in its mechanism. One fall onto concrete can knock it out of calibration permanently.
One shallow drawer: squares and layout tools, everything lying flat, nothing stacked. You'll know where to look. The drawer is faster than you think.
What the wall tells you
A well-built tool wall is diagnostic. If something hasn't moved in eight weeks, you now have information. Either you bought it for the wrong reasons, or it belongs in a different orbit until you have a project that actually needs it.
The inverse is also true. If you're constantly grabbing something that has no home and setting it on the bench, that's telling you something too. The wall should describe how you actually work, not how you planned to work when you first built it.
Every six months, do a quick audit. Anything that hasn't moved goes into the cabinet or out of the shop. The wall stays current.
The goal isn't to put every tool on the wall. The goal is to never waste time looking for a tool you use every day.
Storage as a system. Not a compromise.