Abstract Laser shock processing of water-immersed material was developed for improving the residual surface stress of metal components. The process changes the stress field from tensile to compressive by means of impulsive pressure of laser-induced plasma generated through the ablative interaction of the intense laser pulse with the material. The plasma, generated by the irradiation of second harmonic of a Q-switched Nd:YAG laser (SH-YAG, λ = 532 nm) on an SUS304 test piece, was directly observed by imaging the plasma radiation with a gated image intensifier and a charged coupled device (CCD) camera. Comparing the observed image to the plasma expansion velocity calculated with an analytical model, we deduced that about 20% of the plasma internal energy would represent the thermal energy. The calculation of the plasma pressure with this result showed that it exceeded 2 GPa in water and the yield stress of SUS304, when a typical laser pulse of the SH-YAG impinged on a water-immersed SUS304 test piece. A residual compressive stress exceeding 200 MPa was built over 200 μm in depth, by scanning the SH-YAG focused on a spot of 0.75 mm diameter with a power density of 60 TW/m2 and a pulse duration of 5 ns.