The occurrence of tree flash faults in hybrid overhead–underground lines presents a significant challenge to the smooth operation of power systems. However, research on localizing such faults is relatively scarce. This study conducts theoretical analyses on the formation of tree flash faults, constructs a tree flash fault discharge test platform, and simulates the discharge process. The tree flash fault discharge traveling wave signals were obtained through a high-frequency current acquisition system. Additionally, this paper establishes a model for the current traveling wave of tree flash faults and analyzes transmission attenuation. To enhance the bi-terminal traveling wave localization method, we introduce modal decomposition and the Hilbert–Huang transform. Modal decomposition is used to disentangle signals and derive the instantaneous frequencies of modal signal components through the Hilbert–Huang transform. This process helps determine the time at which the initial wavefront reaches the terminals of the mixed-line transmission. The simulation analysis carried out using PSCAD/EMTDC v4.6.3 demonstrates that this method effectively calibrates the wavefront timing of tree flash fault signals without requiring knowledge of their wave velocity along the mixed-line transmission. Therefore, this approach achieves precise localization of tree flash faults efficiently.