This document summarizes a study that uses finite element analysis to model the 3D heat transfer and residual stress development during the laser engineered net shaping (LENSTM) additive manufacturing process for producing a one-end stepped cylindrical wall out of stainless steel 304. The study uses ANSYS software to simulate the thermal history and stress/deformation results from sequentially depositing 5, 10, 15 and 20 layers. The results show that total deformation is highest at the outer surfaces and interfaces, while normal stress is highest at the cylinder-substrate interfaces. Stress distribution becomes more uniform with increasing number of layers.