The air gap is reserved between the insulation and metal sheath within the cable to mitigate damage resulting from cable bending phenomena. Owing to the temperature sensitivity of insulation thermal expansion, the thermal parameter of air gap layer will undergo significant variations during the transient temperature rise of cable. However, the aforementioned phenomena have not been considered in the existing cable dynamic thermal evaluation methods. To address this issue, in this paper the thermo-force multi-field coupled simulation model of cable with air gap was established and the simulation analysis of dynamic thermal behavior inside the cable was achieved. The error analysis of existing IEC method was conducted in conjunction with the simulation results. Further, the impact of the radial dynamic thermal expansion of insulation on the thermal parameter of air gap layer was discussed. Then, the dynamic modification method of the thermal parameter of air gap layer was proposed and the optimized iterative algorithm for calculating cable transient temperature rise was demonstrated. The accuracy and superiority of the optimized algorithm were verified by the simulation method. The results show that the proposed methodology shows a satisfactory performance in the dynamic thermal evaluation for cable with air gap.