Invar alloy possesses a uniquely low coefficient of thermal expansion, making it an ideal material for fine metal masks. To manufacture fine metal masks, Invar alloys are often cold-rolled, during which residual stress develops. Heat treatment is an effective means to control residual stress that develops within Invar sheets after cold rolling, but the treatment should be carried out with care. In this article, a comprehensive study on the effect of heat treatment on the residual stress, microstructure, and mechanical properties of a cold-rolled Invar sheet is reported. We show that while both recovery and recrystallization are effective means of reducing residual stress, substantial microstructural changes and, therefore, notable changes in mechanical properties and residual stress, occur after recrystallization. Moreover, residual stress release due to recrystallization can be affected by microstructure and texture prior to heat treatment as these factors play a significant role in recrystallization.