In a thin film system involving dissimilar materials, the residual stresses and microstructural defects are inevitable due to the misfits of lattice structures and thermal properties of the materials. Unfortunately, the relationship between the stresses and interface defects is still unclear to date. This article aims to clarify such an important relationship by a finite element (FE) analysis incorporating the dislocation distribution from high-resolution transmission electron microscopy. Layer removal and Raman spectroscopy were also conducted to explore the film-thickness effect. It was found that that residual stress variation in a thin film system is caused by the coupled effect of lattice-thermal misfits and discrete interfacial dislocations, that the residual stresses are dependent on the film thickness, and that it is particularly important to identify the correct density of interface dislocations for an accurate residual stress calculation by a FE analysis.