The natural magnetization method (NMM) is an emerging non-destructive testing technique capable to be applied to condition diagnostic of micro mechanical damage (e.g., plastic damage, fatigue damage) and residual stress in structures of typical austenitic stainless steel. Aiming to clarify the mechanism of the NMM and enhancing its detectability, a simulation method for the natural magnetization signals is proposed and validated in this paper. A two-dimension Ising model considering the paramagnetic and ferromagnetic domains was proposed to simulate the magnetization process of the SUS304 austenitic stainless steel, who’s austenite phase exhibits paramagnetic property, and its martensitic phases is ferromagnetic. The coupling interaction between the ferromagnetic domains are considered theoretically in this model. In order to evaluate the volume fractions between the austenitic and martensitic phases in the SUS304 stainless steel, plastic deformations of different state were introduced into the SUS304 steel specimens through tensile experiments. The volume fractions of the martensitic phase were then measured with a ferrite meter of electromagnetic mechanism for the new Ising model. The Monte Carlo method is adopted to calculate magnetization state of the austenitic stainless steel specimen in external weak magnetic fields. To validate the proposed simulation model, an experimental testing system was established and the magnetization state of the specimens with different plastic deformation were measured. The numerical calculation results of the new model and the Monte Carlo method were in good agreement with the experimental ones, which reveals that the new simulation method is efficient to analyze the natural magnetization signals, and applicable to clarify the magnetization mechanism of the SUS304 austenitic stainless steel due to plastic deformation.