Direct laser metal deposition (DLMD) is a promising additive manufacturing technique which has a huge potential in remanufacturing and restoration of high-value dies/molds and aerospace components. The residual stresses developed in the material deposited via DLMD affect the structural integrity of the restored components. The service life of the restored component will be compromised if tensile residual stresses are present in the deposited layer. The residual stresses originate due to differential thermal expansion/contraction and martensitic transformation-driven volumetric dilation and transformation-induced plasticity. The influence of martensitic transformation and processing conditions on the residual stresses of DLMD-processed components needs to be understood and modeled for sustainable repair. Hence, a finite element model has been developed to capture the coupled effect of thermomechanics and martensitic transformation on the evolution of residual stresses in DLMD. In this study, the individual and coupled effects of strains due to volume dilation and transformation-induced plasticity on residual stress evolution have been analyzed for the deposition of crucible particle metallurgy (CPM) 9 V on H-13 tool steel. The finite element model has been experimentally validated using X-ray and neutron diffractions. The inclusion of both transformation strains in the residual stress decreases the prediction errors of peak tensile residual stress from ∼48% to ∼15%. The fully coupled thermomechanical and metallurgical model has been used to obtain a critical linear mass density corresponding to the onset of a fully compressive longitudinal residual stress state in the deposited layer to ensure sustainable repair.