Cavitation impacts can be utilized to improve material properties such as fatigue strength. In case of such application, cavitation was produced by a cavitating jet. In order to investigate mechanism of surface modification, tool alloy steel was treated by a cavitating jet and the surface was analyzed by using X-ray diffraction methods, i.e., 2D method and a fundamental approach. Residual stress was measured by 2D method and micro strain, which is strain in the grain, was evaluated by a fundamental parameter approach. In the present paper, in order to enhance cavitation impacts, a cavitating jet in air was used for surface treatment of tool alloy steel. It was revealed that a cavitating jet in air can introduce compressive residual stress. It was also shown that micro strain introduced by heat treatment or mechanical finishing was released by a cavitating jet in air.