In power systems, distance relays are commonly employed as the primary protection for transmission lines, and their operation is of utmost importance. Power swings are a type of phenomenon that can lead to improper functioning of conventional distance relays, posing a threat to the uninterrupted flow of electrical power. The occurrence of a power swing disrupts the impedance measured by the relay, causing it to deviate from the normal load condition and enter the relay tripping zones. This research paper introduces a novel method based on the Prony method for extracting current waveform components, enabling fault detection during power swings. Subsequently, the proposed method’s accuracy is assessed through simulations implemented on a nine-bus power system, involving three-phase current signal processing and the application of the proposed algorithm. Various fault scenarios encompassing varying fault distances from the relay position, fault resistances, and power angles within the 9-bus system are simulated to encompass a wide range of fault environments. The simulation results demonstrate the effectiveness of the proposed algorithm in detecting all types of faults, including symmetrical and asymmetrical faults, during power swings.