Friction stir welding (FSW) of hard and high melting point materials such as Nickel and Titanium based alloys is challenging due to excessive tool wear and low weld quality. Various auxiliary energy sources have been proposed in the past decade as an assistance to conventional FSW process. In this work, a modified 3D Finite element (FE) model was developed to simulate the induction preheated FSW of Inconel 718 alloy using ABAQUS/Explicit software package. Investigation of temperature distribution and residual stress generation was carried out for induction assisted FSW (IAFSW) process and compared with those of FSW process. Features such as Arbitrary Lagrangian–Eulerian (ALE) formulation, adaptive meshing technique, mesh sensitivity analysis and mass scaling techniques have been utilised in order to develop a reliable and computationally efficient FE model. Experimental study was carried out with Induction assistance as a preheating method to FSW process. The thermal history of the numerical model was fairly validated with experimental results. Results showed that temperature increased by 138 °C in IAFSW process and was more uniformly distributed as compared to FSW. Residual stresses decreased by 15% on an average in the IAFSW joints. In addition to that, plastic strain and tool reaction forces were also predicted using the FE model proposed in this work. Plastic strain values were higher in IAFSW process with a maximum difference of 55% over the average plastic strain value of FSW at the beginning of the traverse period when temperature was highest. Reaction forces on probe tip reduced by 23% in IAFSW process during the plunge stage.