Eurofer97 steel is a primary structural material for the plasma facing-components of future fusion reactors. Laser welding is a promising technique that can overcome the challenges of remote handling and maintenance. However, the interaction of the induced residual stress distribution with the heterogeneous microstructure may degrade the mechanical performance of fusion components and this has not been fully revealed. Here, we characterised the residual stresses of as-welded and post-heat treated (PWHT) Eurofer97 joints using neutron diffraction and neutron Bragg edge imaging (NBEI) techniques. A typical M-shaped residual stress profile across the fusion zone, heat affected zone and base material is observed by neutron diffraction. A unique W-shaped residual stress distribution is captured by a high resolution NBEI technique within fusion and heat affected zones. The mechanistic connections between micro-hardness, microstructures and residual stresses has been established via correlative microscopy and nanoindentation measurements. The hardness value in the fusion zone of the as-welded sample was almost doubled (from 2.75 ± 0.09 GPa to 5.06 ± 0.29 GPa) by residual stress and fast cooling induced martensite. Conventional PWHT can release 90 ± 3% of residual stress but not fully restore the microstructures. This study paves the way to performing reliable structural integrity and failure prediction for critical structural components of future fusion reactors.