A finite element analysis was carried out on the development of residual stresses during the cooling process from the fabrication temperature in the SiCp reinforced Al matrix composites. In the simulation, the two-dimensional and random distribution multi-particle unit cell model and plane strain conditions were used. By incorporating the Taylor-based nonlocal plasticity theory, the effect of particle size on the nature, magnitude and distribution of residual stresses of the composites was studied. The magnitude thermal-stress-induced plastic deformation during cooling was also calculated. The results show similarities in the patterns of thermal residual stress and strain distributions for all ranges of particle size. However, they show differences in magnitude of thermal residual stress as a result of strain gradient effect. The average thermal residual stress increases with decreasing particle size, and the residual plastic strain decreases with decreasing particle size.