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This paper presents an agent-based protection scheme for distribution networks with distributed generators. The distribution network is divided into several network segments. The relay agents, which are located at the boundaries of these segments, can determine the direction of fault currents using the transients generated by the fault. Fault directions determined by the relay agents located at different points of the network are combined to determine the faulted segment. A fault direction identification technique, which uses the wavelet coefficient of the measured line currents, was developed for relay agents. The performance of the proposed protection scheme is investigated through simulation of a benchmark medium-voltage distribution system.