An evolution of microstructure and internal stress during growth of Fe-Ni electrodeposits with thicknesses up to 40 mu m was analyzed. For particular conditions of the electrodeposition process, an expression was derived to describe the existing correlation between grain size and internal stress. The model of stress generation based on the grain coalescence mechanism was tested, using the experimental grain size data. A comparison of the magnitude of calculated and measured stresses shows that the coalescence component might make a significant contribution for very small grains with a size of less than 0.1 mu m, which were observed in deposits with thicknesses up to 0.5 mu m. For thicker Fe-Ni deposits, the stress measured cannot be explained solely on the basis of the coalescence theory. Moreover, postdeposition measurements did not confirm any decisive influence of codeposited hydrogen on the internal stress. Other factors which may contribute to stress generation during electrodeposition, such as Ni codeposition and annihilation of structural defects, are discussed.