An axisymmetrical-plane-strain model, simulating a perfect casing-cement-formation wellbore section, was developed to study its structural integrity during temperature cycling. Constitutive equations of elastoplasticity and the finite element method were used in the model study. Thermal stresses and deformation were calculated in order to reveal the mechanism of the cement sheath separating from the casing by radial residual stress. It was found that when the temperature increased high enough, the casing deformed plastically, the casing inner surface contracted while outer surface expanded. When the temperature decreased, radial residual stress in the casing-cement sheath interface was tensile which would separate cement sheath from the casing. The wellbore structural integrity was destroyed by the interface separation, providing the chance for inflow of the fluids outside the casing. The impact of the separation on casing collapse was discussed and the probability of the separation extending in the axial direction was predicted.