By combining experimental observations on Gd doped fuel with a theoretical understanding, the variation in thermal conductivity with Gd concentration and accommodation mechanism has been modelled. Four types of Gd accommodation mechanisms have been studied. In UO2−x, isolated substitutional Gd3+ ions are compensated by oxygen vacancies and defect clusters. In UO2, isolated substitutional Gd3+ ions are compensated by U5+ ions and defect clusters. The results indicate that defect clusters can be considered as less effective phonon scatterers and therefore result in less thermal conductivity degradation. The thermal conductivity predicted for UO2 with defect clusters is in good agreement with experimental data for UO2 with 5 wt% Gd2O3. This supports the previous theoretical results that Gd is accommodated through defect clusters in UO2 in the presence of excess oxygen.