Welding is a reliable and efficient joining process in which the coalescence of metals is achieved by fusion. Welding is widely employed in diverse structures such as ships, aircraft, marine structures, bridges, ground vehicles, pipelines and pressure vessels. When two dissimilar plates are joined by welding process, a very complex thermal cycle is applied to the weldment, which further causes inhomogeneous plastic deformation and residual stress in and around fusion zone and heat affected zone (HAZ). Presence of residual stresses may be beneficial or harmful for the structural components depending on the nature and magnitude of residual stresses. In this study, a finite element analysis has been carried out to analyze the thermo-mechanical behaviour and effect of residual stress state in butt-welded in low carbon steel plates. A coupled thermal mechanical three dimension finite element model was developed. Finite element method based software SolidWorks Simulation, was then used to evaluate transient temperature and residual stress during butt welding of two plates. Plate thickness of 8 mm were used which are normally joined by multi-pass operation by Manual Metal Arc Welding (MMAW) process. During each pass, attained peak temperature and variation of residual stresses in plates has also been studied. The results obtained by finite element method agree well with those from X-ray diffraction method as published by Murugan et al. for the prediction of residual stresses.