Recently, laser beam welding of austenitic stainless steel and mild steel has received great attention in industry due to its wider application in petroleum refinement stations, power plants, pharmaceutical industry and also in households. In this study, CO2 laser butt welding was performed on mild steel and AISI 304 stainless steel thin sheets. The influence of welding parameters i.e. laser powers (1400 W, 1500 W and 1600 W) and welding speeds (300 mm/min, 400 mm/min and 500 mm/min) on mechanical properties (i.e. tensile and hardness properties), thermal history and weld induced residual deformation were investigated. It was observed that the laser power and welding speed have significant effect on mechanical properties, thermal history and weld induced residual deformation of welded specimens. Under welding parameter of 1500 W power and 400 mm/min welding speed, the AISI 304 steel and mild steel welded joints exhibited maximum tensile strength which were 87.07% and 105.8% respectively of the base metals. The weld zone (WZ) exhibited the highest hardness in comparison to HAZ and base metals, and a soft zone existed in the heat affected zone (HAZ) of the welded joints. It was observed that the weld zone exhibited microstructure which is thoroughly different from the other zones. In weld zone, the fine grains and inhomogeneity microstructural were observed due to fast cooling rate of this process. It was also observed that increase in laser power and decrease in welding speed resulted increment in residual deformation due to higher heat input per unit length. The feasibility of dissimilar laser butt welding of AISI 304 steel and mild steel was also performed under laser power of 1500 W and welding speed of 400 mm/min. In dissimilar welding the mechanical properties and microstructural analysis of the welded specimen were also investigated. The maximum tensile strength achieved in dissimilar welded joint was higher than the base metal (i.e. mild steel).