Thermal-lag engines are external combustion engines with a single moving piston. This feature leads to lower manufacturing and maintenance costs than traditional Stirling engines. Although the original concept of thermal-lag engines was invented roughly 35 years ago, the information on thermal-lag engines is still limited. Therefore, this study focuses on thermal-lag engine performance by developing a three-dimensional computational fluid dynamics (CFD) model. The grid independence check and the time step independence check are firstly performed to select the number of elements and size of the time step for simulation. The CFD model is then validated by the experimental data, which were collected by measuring an existing prototype engine. It has been found that the CFD predictions are well fitted to the experimental data over the range of engine speed from 200 to 1600 rpm at temperatures of 1173 or 1273 K. Furthermore, the CFD model predicts that the maximum engine power is 21.1 W while the prototype engine practically generates the highest power of 22.35 W at 1000 rpm and 1273 K. Finally, a further parametric study shows that crank radius, piston diameter, working gas mass, working gas species, and heating temperature significantly affect engine power.