We determined the critical size defect (CSD) for regeneration of the axolotl fibula by surgically removing bone segments comprising 10, 20, 40, and 50% of the length of the fibula in 15–20 cm axolotls. The limbs were first subjected to X‐ray and micro‐CT imaging. Half the specimens were stained with methylene blue/alizarin red for cartilage/bone and the other half sectioned and stained with H&E. H&E staining revealed initiation of cartilage formation in 10% and 20% defects by one month; cartilage and bone were regenerated by three months. None of the 40% defects regenerated cartilage by two months post‐operation, and 7/8 (87.5%) failed to regenerate cartilage at three months. None of the 50% defects regenerated cartilage after three months. H&E staining showed that the 40% and 50% defects filled in with fibrous soft tissue. We concluded that the CSD is slightly less than 40% of the length of the fibula. A pig small intestine submucosa (SIS) scaffold did not promote regeneration across a 50% defect. The scaffold degraded by two months after implantation while the defect was filled by connective tissue and disorganized muscle fibers. Our aim is to use the axolotl fibula as a new, convenient model to screen for the optimum combination of growth factors/scaffold that promotes cartilage formation in a CSD, thus mimicking the first step of normal endochondral bone development and fracture repair.