A hollow shafts popular axi-symmetric machine elements, are used frequently under severe service conditions such as for automobile transmissions, the shafts of aircraft, and turbine shafts. They are usually manufactured through the radial-forging process. The residual stress in these forged products directly affects the material stability, the resistance to deformation, the accuracy, and the fatigue life of products. In order to extend the operating life of products and satisfy the required quality of operation during customer usage, it is necessary to monitor the residual stresses during the forging operations. As a way to study residual stress formation due to radial forging, a three-dimensional theoretical model was developed using a non-linear finite-element method program. The workpiece used in the calculations was alloy steel MILS 11595 and was assumed to have elasto-plastic behavior during forging. The Coulomb friction law was applied to simulate the contact behavior between the workpiece and the mandrel and between the workpiece and the die. The residual stress distributions in the forged product were calculated and selected results were compared with published experimental data to verify the effectiveness of the developed model.