The breaking capacity of rated current is one of the important indexes to evaluate the performance of circuit breakers, which is usually measured experimentally and cannot be analyzed in terms of the arcing characteristics of the opening process. Simulation methods based on the magnetohydrodynamic (MHD) model of the arc can be used to obtain the macroscopic motion of the arc within the interrupter and the interaction of the arc with the contacts, walls, and splitter plates. Therefore, this paper focuses on the arc interruption characteristics’ underrated current in low voltage circuit breakers by MHD simulation. A more accurate and effective field-circuit coupling MHD simulation model of low voltage circuit breaker products is developed in this paper. A nonlinear conductivity model of the sheath layer is considered to better simulate the near-pole voltage drop and bending processes after the arc has been cut by the splitter. The time-dependent magnetic field generated by the arc is considered in the calculation. Additionally, the real-time parameters of the external circuit are coupled to reflect the evolution of the arc characteristics under the action of the external circuit. The simulation results intuitively and clearly show the evolution of the arc during the breaking process. Through this, an arc extinguishing chamber can be designed to effectively regulate the arc interruption characteristics, thereby improving the breaking capacity of the circuit breaker. The accuracy and efficiency of the proposed simulation method is verified by experiments. This method can be extended to the performance analysis of AC/DC low voltage circuit breakers.