Canine influenza virus (CIV) is a newly identified, highly contagious respiratory pathogen in dogs. Recent studies indicate that avian-origin H3N2 CIV are circulating in Chinese dogs. To investigate the effects of a two-amino acid (2-aa) insertion naturally occurring at the distal end of the neuraminidase (NA) stalk found in Chinese isolates since 2010 on virus replication and virulence, we rescued the CIV strain, A/canine/Jiangsu/06/2011(H3N2) and its NA mutant without the 2-aa insertion using reverse genetics. The NA stalk length affected virus growth in cell culture. Compared to the short stalk strain (without 2-aa insertion), the long stalk strain (with 2-aa insertion) exhibited higher peak titers and greater yields in Madin-Darby canine kidney (MDCK) cells, chicken embryo fibroblasts and canine bronchiolar epithelial cells, as well as much larger plaques in MDCK cell monolayers. Furthermore, mice inoculated with the long stalk strain showed more severe pathologic damage in lung and higher proportion of detectable viral RNA in tissues. The long stalk strain induced local IFN-γ production with faster kinetics and higher levels in mice. However, in chickens, the two viral strains showed no significant difference with nearly the same proportion of detectable viral RNA loads in tissues. These observations suggest that the 2-aa insertion in the NA stalk acquired by avian-origin H3N2 CIV helps to enhance viral replication and is likely a result of adaptive evolution in canine hosts.