A new method for fault line selection in distribution system with arc suppression coil grounding with square-wave signal injection is proposed. A low frequency square-wave signal is injected from the secondary side of bus voltage transformer， the phase currents flowing through each feeder are detected， and then the relationships of the amplitudes of their fundamental and the third harmonic components are analyzed to select the fault line. The principle of the method is introduced in detail， and the criterion of fault line selection is proposed as well. The analogical test results show that the method has good ability to eliminate the influence of distributed capacitance and the detection accuracy is improved with large grounding resistance.