This paper proposes a novel fault location algorithm of distribution automation master system for urban distribution system with distributed generation (DG). A differential current ratio (DCR) is constructed in the paper which contains the differential current information to describe the feature of faulted segment and differential current information of normal one. The faulted segment would have a DCR that the value is less than one while the normal one would have a DCR far larger than one. Basing on the distribution feature of fault current, that the largest fault current would be sensed by one of FTUs in the faulted segment, an optimized searching process is given. The core of the fault location algorithm is to search the segment with the smallest DCR. This method uses only currents and thus avoids the need for installation of voltage transformers. Furthermore, the method does not require time synchronized measurement and therefore, more practical and economical to implement on existing distribution system. The PSS/E simulation results indicate the method could locate faulted segment correctly in urban distribution network with DG.