The DC hybrid circuit breaker based on high-speed switch (HSS) and parallel connected capacitor has been widely applied in the fault current breaking of DC system. However, when the current is commutated from HSS to the capacitor according to single-stage operation, the capacitor has to absorb a large amount of energy stored in the system inductance within very short time. Meanwhile, a high over-voltage rate of rise is especially prone to be produced between the contacts of HSS, which will lead to a failed breaking. As a result, a novel DC hybrid circuit breaker based on the two-stage operation is proposed and analyzed in this paper. By controlling the thyristors in the commutation branches, the fault current is fast commutated into the capacitor, which can not only realize the arcless open of HSS, but also decrease the over-voltage rate of rise significantly in comparison to the traditional single-stage operation. The simulation model of fault current breaking under different conditions in 10 kV medium voltage DC system is constructed. The simulated over-voltages of single-stage and two-stage operations in the case of fault current breaking are compared and analyzed. Finally, the fault current breaking test in the two-stage operation is investigated experimentally, which validates the feasibility and effectiveness of the simulation model well.