A cutter is a small patrol craft for in-system use. In Starfleet, cutters are used by both the Merchant Marine and Military Operations Commands. These vessels are lightly armed and shielded. Cutters are warp-capable, and their in-system maneuverability is very good. (FASA RPG module: Ship Construction Manual)
In emergencies or war times, cutters may be pressed into service as light attack fighters.