<p>Compressive residual stresses induced by micro-shot peened (MSP) exhibit a significant effect on inhibiting fatigue crack propagation and enhancing the fatigue resistance of materials. However, the cyclic relaxation of compressive residual stresses leads to a deterioration in their inhibitory effect on fatigue cracks. In this study, a numerical calculation model for residual stress in MSP-strengthened 18CrNiMo7–6 steel was established, considering the effects of surface work hardening and grain refinement. The numerical predictions of grain size, hardness, residual stress, and residual stress relaxation showed good agreement with the experimental data, verifying the accuracy of the model. On this basis, a numerical prediction model for fatigue crack propagation in MSP-strengthened components was developed using the extended finite element method, which accounted for residual stress relaxation. The model was validated through comparison with experimental data. The results indicated that the remaining compressive stress after relaxation could still hinder crack propagation, ultimately increasing the fatigue life by 27%. Residual stress relaxation was most significant near the crack (within approximately 2 mm), where a transformation from residual compressive stress to tensile stress even occurred. During the unloading process, the surrounding material exerted a compressive effect on the plastic zone at the crack tip, leading to a transient 17% increase in the residual compressive stress.</p>