A smart grid concept has been defined in recent years, which emphasizes the importance on smart protection and measurement devices, reliable data communication and high security, optimal energy management system, and fault detection, location, isolation and service restoration (FLISR) of distribution networks (DNs). The main objectives of the FLISR approach are to achieve fast fault processing time, reduce the minimum number of interrupted customers, and improve the power supply reliability of the distribution. The conventional FLISR approach is to use signals of fault indicators (FIs) with distribution network states. The discrete installation of FIs to switches or reclosers may slow the processing time of fault detection and location, so it is necessary to develop a more efficient FLISR approach for smart distribution networks using functions of feeder terminal units (FTUs). In this paper, pick-up and tripping signals of overcurrent (OC) relays in combination with distribution grid states (e.g., switching status of devices, loss of voltage…) sent from feeder terminal units (FTUs) are used to detect and locate different fault types. Fault isolation and service restoration of black-out areas are then performed by solving an objective function with two main constraints, including (i) restoring the possible maximum number of out-of-service loads; and (ii) limiting the minimum number of switching operation. Thirteen performance factors (PF) are used for the post-fault service restoration process, consisting of: (i) Power Flow Violations (PFV), (ii) Bus Voltage Violations (BVV), (iii) Total Operation Cost (TOC), (iv) Lost Power (LP), (v) Outage Customer (OC), (vi) Number of Switching Steps (NSS), (vii) Power Losses (LOSS); (viii) Customer Minutes Interruption (CMI), (ix) Load Minutes Interruption (LMI), (x) MAIFI, (xi) SAIFI, (xii) SAIDI, and (xiii) Protection Validation (PRV). E-Terra platform of a distribution management system (DMS) is used to implement the proposed FLISR approach. Simulation and experiment results from a real 22 kV distribution network are also analysed to validate this FLISR approach. As a result, the novel FLISR approach has the ability to identify effectively the over-reaching of OC relays, indicate a mis-coordination risk of adjacent protection devices on the same feeder, and get the total processing time of fault detection, location and isolation as well as ranking all possible service restoration plans in distribution network at less than two minutes.