Friction stir welding (FSW) is widely accepted by industry because of multiple advantages such as low-temperature process, green technology, and capable of producing good quality weld joints. Extensive research has been conducted to understand the physical process and material flow during FSW. The published works mainly discussed the effects of various process parameters on temperature distribution and microstructure formation. There are few works on the prediction of defect formation from a physics-based model. However, these models ignore chip formation or surface morphology and material loss during the FSW process. In the present work, a fully coupled 3D thermo-mechanical model is developed to predict the chip formation and surface morphology during welding. The effects of various process parameters on surface morphology are also studied using the current model. Coupled Eulerian-Lagrangian (CEL) technique is used to model the FSW process using a commercial software ABAQUS. The model is validated by comparing the results in published literature. The current model is capable of predicting the material flow out of the workpiece and thus enables the visualization of the chip formation. The developed model can extensively be used to predict the surface quality of the friction stir welded joints.