Compared with other machining processes, grinding operation has a very high energy density that generates very high temperatures in the ground zone. The temperature history is the key loading that induces a complex residual stress field generated per dilatation and solid-state phase transformations, in addition to the normal and tangential mechanical loading. The various phase transformations encountered by steels when submitted to rapid heating and cooling have been modeled and implemented in a finite element model. The AISI-52100 bearing steel is taken here as reference material. The thermo-metallurgical and mechanical analysis has been performed using the commercial finite element software Abaqus®/Standard with various user subroutines developed to model the thermal, metallurgical and mechanical behavior of the material. The heat generated during grinding process was assumed as a moving heat flux with elliptical distribution. The effects of the Peclet number and heat transfer coefficient on the phase transformations and residual stresses have been analyzed. It was found that an optimal combination of grinding conditions could produce the desired magnitude of compressive residual stresses at the surface of the machined workpiece. It is also shown that omitting phase transformations could lead to a strong difference in the prediction of residual stresses.