The relaxation of compressive intrinsic stress for a film–substrate system is modelled with discrete dislocation dynamics (DDD). Compressive stress arises due to the diffusion of extra material into the grain boundaries during deposition. Dislocation nucleation and motion relax the stress in the thin film. The effect of microstructure on the process is found to be two-fold. As the grains get finer, the initial compressive stress becomes higher and more homogeneous, while impenetrable grain boundaries also cause higher hardening. The two effects seem to balance out when there are few sources available for dislocation nucleation. When the density of sources is high, relaxation behavior seems to be less affected by microstructure since both effects get weaker when the limit of continuum behavior is approached.