The tensile stress and microstructure of 316L stainless steel welded joints are heterogeneous, and therefore the great risks of stress damage corrosion will be introduced. In the present study the welded joints were treated by laser shock peening (LSP) with different power density. Through residual stress test, microscopic analysis by XRD, SEM and TEM, the residual stress distribution, phase structure and microstructure were characterized, and the mechanism of LSP was discussed. The results showed that by the use of different power density, the residual tensile stress of welded joint decreased in comparison with welded sample. With the increasing of power density, these residual tensile stresses generated were superseded by the compressive residual stresses, and the maximum compressive residual stress reached about −100 MPa. By laser shock processing under different power density, the severe plastic deformation appeared in the surface layer of welded joint, high density nanocrystals and dislocation formed. However, there was difference for the plastic deformation characteristic among the three regions from weld seam, heat-affected zone, matrix zone, this should be accomplished by the interaction of the grain state, size and orientation with the laser shock peening. Moverover, the phase transformation from austenite to martensite was observed in the surface layer of welded joint, when the power density increased to 6.63 GW/cm2, while this is harmful for the improvement of stress corrosion resistance. Therefore, a specific laser power density is propitious to improve the residual compressive stress and microstructure of the weld joint, thus to gain better stress corrosion resistance.