Fault analysis with hybrid compensation for unbalanced distribution systems is proposed. The method employs the unbalanced three-phase model to analyse faults. Two matrices containing information of the topological characteristics of distribution networks were built along with the proposed hybrid-compensation method for analysis. Appropriate boundary conditions can be obtained for a fault to solve various types of single or simultaneous faults. The time-consuming lower upper (LU) decompositions, the Jacobian matrix or the Y admittance matrix, required in the traditional algorithms, are not needed in the new development. Test results show that the proposed method is efficient, easy to program, also with advantages of high speed, robustness, improved accuracy and lower memory requirements.