This paper presents a finite element simulation of the thermomechanical phenomena occurring during Hot Isostatic Pressing (HIP) of a powder metal component which includes a graphite core. The thermomechanical coupling is achieved in a staggered step manner. The staggered step approach considers the coupled thermomechanical response of solids, including nonlinear effects in both the thermal and mechanical analyses. The creep behaviour of the powder material during densification is modelled using the constitutive equations of thermal elasto-viscoplastic type with compressibility. The various mechanical material properties are assumed to be functions of temperature and relative density. The mechanical solution also includes large deformation and strains. The thermal problem includes temperature and relative density dependent specific heat and thermal conductivity. The constitutive equations and relations for thermal characteristics are implemented into the implicit nonlinear finite element code, PALM2D. The simulation of the HIP process of a component with internal core is chosen as an application example. The component, injection molding tool, is produced of a hot isostatically pressed stainless tool steel with an internal cavity which is achieved by inserting a graphite core into the HIP container. To verify the result of the simulation, the geometry of the capsule and the coated core are measured both before and after pressing using a computer controlled measurement machine (CMM). The measured geometry is compared with the simulated final shapes of the container and internal core. A computer-aided concurrent engineering system (CACE) is used for the complete manufacturing process from the design of the component and finite element simulation to the inspection of the final geometry.