The residual stresses generated in the machined work piece have detrimental effect on fatigue life, corrosion resistance and tribological properties. However, the effect of cutting and vibration parameters on residual stresses in Ultrasonic Assisted Turning (UAT) has not been dealt with. The present paper highlights the effect of feed rate, depth of cut, cutting velocity and percentage intensity of ultrasonic power on residual stress generation. XRD analysis has been carried out to measure the residual stress while turning 4340 hardened steel using UAT. The experiments were performed based on response surface methodology to develop statistical model for residual stress. The outcome of ANOVA revealed that percentage intensity and feed rate significantly affect the residual stress generation. The significant interactions between process parameters have also been presented tin order to understand the thermo-mechanical mechanism responsible for residual stress generation.