The residual stress distribution of microstructure about Cu-Fe-P alloy for lead frame is simulated by finite element method of elastic-plastics deformation. The effect of the density of Fe particle on residual stress is mainly analyzed. It is indicated that the larger the density of particle is, the larger residual stress in particle and matrix near the interface is, and the larger stress difference between both the sides is. When the density of Fe particle is 35% and the compressive extent of cold rolling is 25%, in the X-direction, the stress variation of the Cu matrix is from compressive 900MPa to tensile 1480MPa, and stress of the Fe particle is about compressive 246MPa. The maximum residual stress gradient near the interface between Cu matrix and Fe particle reaches 1726MPa. The bigger stress concentration and residual stress will destroy the quality of the material. Even peelings on the surface occur. So the appearance of bigger Fe particle goes against the quality of the material, and it should be avoided as far as possible in the production of Cu-Fe-P alloy for lead frame.