Induction hardening is a heat treatment process that enhances the mechanical properties of materials, improving their resistance to fatigue, fracture, and wear. Unlike conventional methods, induction hardening selectively heats the surface of the material, forming a high-hardness layer while leaving the core relatively unaffected. In addition, it generates a compressive residual stress layer in the surface, which is beneficial for the component service behaviour. This compressive layer progressively decreases, turning tensile at the boundary of the hardened layer, and gradually decreases in the untreated core. This study first focused on the numerical simulation model to analyze the physical mechanisms involved in the process and select the ideal calculation method. Subsequently, the effects of the material’s carbon content and the quenching severity on hardness and residual stress formation after the induction hardening of a cylindrical 42CrMo4 steel specimen are examined. For this purpose, a coupled thermo-metallurgical-mechanical finite element model in ANSYS^® is employed. The findings underscore the importance of accounting for all factors contributing to stress generation to accurately predict the material’s behaviour. Additionally, the results highlight the significant impact of carbon content on the hardness of the hardened layer, as well as the substantial role of quenching medium severity in shaping the axial residual stress profile within the material.