Repairing worn steels using laser powder deposition (LPD) is the focal point of most of the recent studies. The LPD process resides large, anisotropic stresses, which adversely affects the fatigue life. This study investigated residual stresses in a 136RE rail that is repaired via LPD. Residual stresses were measured using X-ray diffraction (XRD). The spikes on the repaired rail sample were discovered using a stylus profiler, and showed peak heights higher than the X-ray penetration depth. This resulted in measuring low stresses due to the interruptions to X-ray beam by the spikes. The sample was polished to eliminate those spikes. However, XRD stress measurement then showed higher stresses than expected, because of the induced stresses on the surface during polishing. Hence, the surface materials were removed by etching to release those stresses. The etched sample was used to measure stress distribution in the repaired rail. The highest tensile values were found at the first and last deposition layers. Comparing the measured stresses (∼250–300 MPa) against the deposition material yield strength (∼215 MPa) indicates a great risk of early cracking. Preheating and post-heating were suggested as viable techniques to reduce the undesirable tensile stresses.