Considering the significant influence of thermal stress on the coating quality during the in situ fabrication of new iron particle-reinforced alumina coating by laser melting, we investigated the thermal stress of a single-pass composite alumina coating on the surface of titanium alloy in this study. The representative volume element method was used to simulate and calculate the thermodynamic parameters of the new coating. The heat source model of the laser-induced thermal reaction heat was established using a combination of the raw-dead cell method and internal raw-dead heat source. The thermal stress distribution pattern of the coating components at the end of the cladding under different combinations of process parameters was calculated and analyzed. The results indicate that the thermal stresses are primarily concentrated in the coating and its bonding surface with the substrate and the tensile stresses on the coating along the melting direction are the main causes of transverse cracks in the coating. Owing to the laser-induced thermal reaction, the coating cracks increase with laser power and laser scanning speed. At 600 W laser power, the coating has the lowest number of cracks when the scanning speed is 2 mm/s. Moreover, at a scanning speed of 5 mm/s, the coating has the lowest residual stresses when the laser power is 300 W.