Tissue-engineered bone (TEB) has shown to be an effective alternative to conventional gold-standard autogenous bone for the repair of critically sized bone defects (CSBD). Moderate axial interfragmentary movement (IFM) has been shown to promote bone healing in conventional models. This study explored the use of IFM to enhance the capacity of TEB in the repair of CSBD using a goat model. CSBD were created in a goat model. Dynamic intramedullary rods designed to supply axial IFMs within 10% of the interfragmentary strain were used to stabilize CSBD goat femur models, whose bone defects were filled with TEB. Bone regeneration was evaluated using radionuclide bone imaging, roentgenographic analysis, periosteal callus area, computed tomography value score, biomechanical analysis, and histological observation. Compared with the static intramedullary rods, the dynamic intramedullary rod group showed an increase in early-stage callus formation and blood supply to the callus tissue, better differentiation of fibrous and cartilaginous tissue into bone tissue, improved strength and stiffness of callus tissue in late-stage healing, and overall better functional recovery of the goat femur. This showed that moderate axial IFM could promote the osteogenesis and reconstruction of TEB in vivo.