Extensive applications of fishery stock enhancement worldwide bring up broad concerns about its negative effects, creating a pivotal need for science‐based assessment and planning of enhancement strategies. However, the lack of mechanistic understanding of enhanced population dynamics, particularly the density‐dependent processes, leads to compromise in model development and limits the capacity in predicting enhancement effects. Here, we developed an individual‐based model based on dynamic energy budget theory and full life‐history processes, to understand the mechanism of density dependence in population dynamics that emerge from individual‐level processes. We demonstrated the utility of the model framework by applying it to an extensively enhanced species, Chinese prawn (Fenneropenaeus chinensis, Penaeidae). The model could yield projections reflecting the observed trajectory of population biomass and yields. The model also delineated the key effects of density dependence on the vital rates of growth, fecundity and starvation mortality. Regarding the manifold effects of stock enhancement, we demonstrated a dampened shape in population biomass and yields with increasing magnitude of enhancement, and trade‐offs between the ecological and economic objectives, that is, pursuing high benefit might compromise the wild population without proper management. Furthermore, we illustrated the possibility of combining stock enhancement and harvest regulation in promoting population recovery while maintaining fisheries yields. We highlight the potential of the proposed model for understanding density dependence in enhancement programme, and for designing integrated management strategies. The approach developed herein may serve as a general approach to assess the population dynamics in stock enhancement and inform enhancement management.