Downward axial relocation of fuel fragments within distending fuel rods may occur during loss-of-coolant accidents (LOCAs) in light water reactors. The fuel relocation may localize the heat load to “ballooned” parts of the rod, thereby increasing the risk for cladding failure and aggravating local oxidation. It may also increase the amount of fuel dispersed into the coolant, should the cladding fail. Recent LOCA tests have revived interest in the relocation and dispersion phenomena, since the test results suggest that high burnup UO2 fuel pellets may pulverize into very fine fragments, with a higher potential for axial relocation and subsequent dispersal than observed earlier for low to medium burnup fuel. To improve our understanding of these phenomena, a computational model for axial relocation of fuel fragments during LOCA and its effects on the fuel rod heat load and failure processes has been developed and introduced in the FRAPTRAN-1.5 computer program. The axial fuel relocation is calculated on the basis of estimated fuel fragment size distributions and the calculated cladding distension along the fuel rod, and its effects on the axial redistribution of fuel mass, stored heat and power are accounted for in FRAPTRAN’s calculations of the fuel rod thermo-mechanical behaviour. The model has been validated against the IFA-650.4 integral LOCA test in the Halden reactor, Norway, which was done on a very high burnup UO2 fuel rodlet and resulted in extensive fuel pulverization, axial relocation and fuel dispersal into the coolant. Our simulations of this test suggest that thermal feedback effects from axial fuel relocation are strong enough to significantly affect the dynamics of cladding ballooning and rupture, even though the calculated duration of these processes is no more than 7–8 seconds. Moreover, for the considered LOCA test, the axial relocation has a strong effect on the calculated peak cladding temperature and oxidation after rupture.