The main objective of this article was to show for the first time that heat transfer plays a major role in residual stress generation during the dry drilling of Inconel 718, and to propose a numerical strategy capable of simulating such thermo-mechanical phenomena. An X-ray diffraction (XRD) analysis shows that without lubrication, high tensile residual stresses can be observed on the surface of a deep through drilled hole. Such a situation can be highly detrimental for the fatigue lifetime of a mechanical component. A thermal history in five phases is first identified by means of temperature measurements exhibiting an overheating of approximately 500 ∘C on the created hole surface just before the end of the drilling operation. A 3D thermo-viscoplastic model is herein improved in terms of boundary conditions to show that this phenomenon is triggered by the progressive decrease in the Inconel 718 volume under the cutting zone. To the authors’ knowledge, such a phenomenon has never been reported and simulated before in the literature. Then, a 3D thermo-elasto-plastic simulation including elasticity is proposed to compute residual stresses from the thermal results of the previous model. It shows for the first time that the overheating stage induces sufficiently intense plasticity to produce high tensile residual stresses of approximately 900 MPa as we experimentally observed.