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The unbalanced nature of distribution systems due to single-phase laterals and loads gives difficulty in the fault location. This paper proposes a new fault location algorithm developed by the direct three-phase circuit analysis for unbalanced distribution systems, which has not been investigated due to high complexity. The proposed algorithm overcomes the limit of the conventional algorithm, which requires the balanced system. It is applicable to any power system, but especially useful for the unbalanced distribution systems. Its effectiveness has been proved through many EMTP simulations.