The characteristics of xenon dynamics are simulated, and related parameters are identified in the Taiwan Research Reactor. A xenon transient for a 20% stepwise decrease from 85.6% rated power is performed and simulated with design data. The trends in the moderator levels are similar in the test and in the simulation. However, there are discrepancies in the magnitude and shape. Because no reactivity feedback occurs for 2 h after the power change, except for xenon poisoning, a parameter optimization method is applied to identify the migration area and the initial neutron flux by minimizing the integrated square error of the moderator level from 2 to 20 h after the power change. The optimized moderator level fit the test result very well, and the identified parameters are reasonably close to the experimental data.