Abstract: The method of reducing single-phase grounding short-circuit current of small current grounding system through installing arc-suppression coil may result in failure of fault line selection device. The paper introduced a method of fault line selection in distribution network based on transient zero sequence component.The method uses db10 wavelet packet to decomposition transient zero sequence current flowing through every feeder line when the fault occurs, finds two feature bands with the largest and the second largest energy, and makes correlation analysis between wavelet packet decomposition coefficients of the two bands, so as to select the fault line.It took system with neutral grounding via arc suppression coil as an example to build simulation model, and made simulation experiment of grounding fault in both overhead line and cable. The experimental results demonstrated effectiveness of the method.