The effect of dielectric liquid and electrode type on white layer structure in electric discharge machined surfaces has been studied in terms of retained austenite and residual stresses using X-ray diffraction method. The machining tests were conducted by using two different tool electrodes (copper and graphite) and dielectric liquid (kerosene and de-ionized water) under same operational conditions. The present work suggests that the surface is saturated with carbon irrespective of the tool electrode material when machining with kerosene dielectric liquid. But, retained austenite is formed on the surface due to carbon uptake from graphite tool electrode when machining with de-ionized water dielectric liquid. On the other hand, even though surface residual stresses increase with structural non-homogeneities in the white layer, no clear consequences have been observed in residual stress distribution beneath the white layer.