This paper puts forward a new method of pre-stress hard cutting which integrates pre-stress and hard cutting technology. A thermo-mechanical coupling model of Finite Element Analysis (FEA) for pre-stress hard cutting on material 42CrMo steel is established. In this model, chip-work separating is made by applying shear fracture failure criterion, element deletion and adaptive mesh technique based on arbitrary Lagrangian Eulerian (ALE) method. The key technology for FEA, such as intrinsic equation of workpiece material, chip separating criterion and friction model of tool-chip interface and thermal conduction equation are researched respectively. Then FE simulation of chip forming and cutting force in pre-stress hard cutting is made and relationship between pre-stress and residual stress on machined surface under various cutting conditions is got. Simulation result is compared with that of experiment and found they are good in accordance.