The assessment of welding-induced residual stress is always of significant interest due to its adverse effect on the structural stability and mechanical performance of the welded structure. Incorporation of intricate phenomena, in particular, thermal gradient, phase development, volumetric dilation, and phase transformation strain during FE modelling, not only acts as a reliable method for residual stress calculation but also serves as a directive to reduce tensile residual stress in a weldment which is sensitive to the selection of materials. In order to investigate the same for continuous and pulse laser-welded Ti–6Al–4V alloy, the sequentially coupled thermal–metallurgical–mechanical models are established. The internal state-dependent variables (SDVs) are implemented to capture the growth of phase evolved during diffusionless β → α′ transformation using Koistinen–Marburger (K–M) theory in the cooling cycle. The role played by a phase transformation induced strain on the generation of residual stress is systematically investigated. The volumetric dilation and associated phase fraction form the basis for the estimation of phase transformation strain in the present study. The accomplishment of highest martensitic fraction (∼95%) produced a phase transformation strain of 7.95 × 10−3 in pulse mode of operation. As a result, reversal of residual stress from tensile to compressive is perceived for pulse laser-welded specimen. Similarly, a sign of enriched martensitic transformation is noticed that puts the weld surface into a compression state and mitigates the overall tensile residual stress. The assumption of diffusional phase transformation during heating cycle and non-diffusional transformation during cooling phase in laser welding is more appropriate to predict the residual stress using thermal–metallurgical–mechanical model.