An experimental study was performed for non-destructive microstructural characterisation of laser surface treated AISI 1040 steel specimens with a portable X-ray diffraction based residual stress analysis system. Laser treated specimens were characterised by residual stress and (211) ferrite peak width measurements, and results were compared with those obtained by optical microscopy. The techniques were sensitive enough to distinguish four different cases arising during laser surface treatment, namely, no transformation hardening, insufficient hardening, adequate transformation hardening and surface melting. On the laser treated surface, the extents of laser melted zone and various microstructural zones of solid state transformation hardened region could be clearly identified. Although both the techniques provided fair estimate of total width of laser treated region, ferrite peak width is a more sensitive parameter to record microstructural transitions involving change in tetragonality of martensite. The technique has a potential for in situ microstructural analysis of ferritic steel weldments.