Stress induced sensitization on heat affected zone (HAZ) of 304 LN austenitic stainless steel was studied using the thermo mechanical simulator (Gleeble 3800). The study was carried out using the weld thermal cycle and residual stresses, observed during pulse gas metal arc welding (P-GMAW) of 28 mm conventional groove weld. Layer wise study of weld seam deposition was done to understand the characteristic of stresses and thermal behavior on HAZ created by its adjacent weld seam during welding. The degree of sensitization, as a function of stress-type (tensile or compressive) and its magnitude under the thermal behavior of multi-pass heating and reheating in HAZ, has been studied through observations on changes in microstructure, electrochemical properties and variation in hardness of the matrix. It was observed that irrespective of its tensile or compressive nature, the increase in magnitude of residual stresses appreciably enhances the sensitization of the matrix by formation of Cr23C6 precipitate as confirmed by high-resolution transmission electron microscopy (HRTEM) analysis. Also the study includes widening of HAZ grain boundary as well as increase of degree of sensitization (electrochemical studies) and hardness.