This study investigates the thermal and residual stress development in multi-layer lined pipe welding through numerical simulation and experimental validation. The focus is on the weld overlay/liner transition region, a critical area prone to stress concentrations and fatigue crack initiation. Using finite element analysis (FEA) with the Goldak double-ellipsoidal heat source model, the research examines the temperature evolution, residual stress distribution, and deformation characteristics during the welding process. Key findings reveal that the peak temperature in the weld overlay region reaches 3045.2 °C, ensuring complete metallurgical bonding. Residual stresses are predominantly tensile near the three-phase boundary, with maximum von Mises stress observed in the base pipe at 359.30 MPa. This study also employs Response Surface Methodology (RSM) to optimize welding parameters, achieving a 20.5% reduction in residual axial stress and a 58.1% reduction in residual circumferential stress. These results provide valuable insights for optimizing welding processes, improving quality control, and enhancing the long-term reliability of bimetallic composite pipelines.