Since magnetism is strongly stress dependent, Magnetic Flux Leakage (MFL) inspection tools have the potential to locate and characterize mechanical damage in pipelines. However, MFL application to mechanical damage detection faces major hurdles, which make signal interpretation problematic: 1) the MFL signal will be a superposition of geometrical and stress effects, 2) the stress distribution around a mechanically damaged region is very complex, consisting of plastic deformation and residual (elastic) stresses, 3) the effect of stress on magnetic behaviour is not well understood. This paper summarizes a number of our studies concerned with mechanical damage and the effects of elastic and plastic deformation on MFL signals. The first series of experiments was conducted using uniaxial loading into the plastic deformation regime. Magnetic measurements made in situ with this uniaxial deformation showed that magnetic behaviour is far more sensitive to elastic, compared to plastic, deformation. Unloading the samples resulted in a combination of plastic deformation and residual stress. Subsequent ‘staged’ stress relieving heat treatments enabled us to progressively remove the residual stresses, and characterize their effects on magnetic behaviour and MFL signals. In a second series of experiments we simulated mechanical damage using a tool and die press to progressively ‘dent’ a number of plate samples. As with true mechanical damage, the resulting MFL signals arise from both geometrical and residual stress effects. Subsequent stress relieving heat treatments were used to separate and compare the ‘geometrical’ MFL signal from the ‘residual stress’ MFL signal.