Internal curing (IC) and other shrinkage mitigating materials are employed to reduce shrinkage and risk of cracking. This study investigates the efficiency of individual versus combined use of IC and shrinkage mitigating materials on key characteristics of fiber-reinforced mortar (FRM). The investigated mixtures include a 25% pre-saturated lightweight sand (LWS) that is added individually and combined with 10% CaO-based expansive agent (EA) and 2% shrinkage reducing admixture (SRA). This elucidates the synergistic effect of high content IC and EA/SRA on macro- and micro-mechanical characteristics of FRM, especially at the interface of the matrix with fibers. Mechanical properties, microstructural characteristics, and fiber–matrix bonding of FRM made with 0.5% steel fibers are investigated. The results show that the use of IC with EA and SRA completely compensates for shrinkage at 56 days. The highest compressive and fiber pull out strengths are observed for FRM with IC and without EA/SRA due to the densification of the interfacial transition zone (ITZ) confirmed by microstructural analysis. Such improvement is associated with the lower porosity of the cement paste and longer silicate chain—higher Si/Ca—obtained by FRM made with LWS. Although the combination of both EA and SRA with IC leads to 180 μstrain expansion after 56 days, the corresponding mixture presents the weakest ITZ and inferior mechanical properties.