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When a fault occurs on a transmission line, it is required to find out the fault point, clear the fault and resume power supply as soon as possible. This requires a highly accurate fault location. Besides the principle of the algorithm, the precision of fault location is also influenced by the way the sampled data is processed. In this paper, the differential equation is taken as the algorithm of transmission line fault location. The estimation, by the least square method, has optimum statistical character under certain conditions. After the parameter is estimated by the least square method, considering the model of a noisy system cannot be easily obtained, the auxiliary variable method is introduced to rectify it. The EMTP simulation and RTDS simulation confirm the validity of the data processing method and show that the result is steady. This indicates that the method works well in reducing the influence of noise. The accuracy can satisfy the requirement in engineering.