An on-line method for detecting and locating a faulty node in the utility grid is proposed for smart grids. The method is based on injection of high frequency (A-Band) current signal into the grid that would impose voltages (less than 1V according to EN50065-1 standard) on the nodes to determine changes in the impedance characteristics. This detection is accomplished on-line without interrupting the power flow in the network. The developed algorithm has been implemented within an electrical power system model. This low voltage network model has been tested with different fault scenarios. The proposed procedure is able to detect the faulty nodes with high accuracy.