Because the interaction layers that form between U-Mo particles and the Al matrix degrade the thermal properties of U-Mo/Al dispersion fuel, an investigation was undertaken of the undesirable feedback effect between an interaction layer growth and a centerline temperature increase for dispersion fuel. The radial temperature distribution due to interaction layer growth during irradiation was calculated iteratively in relation to changes in the volume fractions, the thermal conductivities of the constituents, and the oxide thickness with the burnup. The interaction layer growth, which is estimated on the basis of the temperature calculations, showed a reasonable agreement with the post-irradiation examination results of the U-Mo/Al dispersion fuel rods irradiated at the HANARO reactor. The U-Mo particle size was found to be a dominant factor that determined the fuel temperature during irradiation. Dispersion fuel with larger U-Mo particles revealed lower levels of both the interaction layer formation and the fuel temperature increase. The results confirm that the use of large U-Mo particles appears to be an effective way of mitigating the thermal degradation of U-Mo/Al dispersion fuel.