The present work concentrates on the modeling of the residual stress and cracks induced during the machining of AISI 4340 in die-sinking EDM. Response surface methodology with rotatable central composite design is used with peak current, pulse on duration, voltage and pulse duty factor as process parameters. The relation between these process parameters and induced residual stress and cracks is established. The results of ANOVA elucidates that the present model is significant. Voltage and pulse on time are observed to have major dominance on residual stress. The SEM images reviled that micro-cracks resulted from the thermal stresses developed during machining of the workpiece. At higher levels of pulse on duration, wider cracks are observed due to high thermal gradients.