Loop distribution systems are increasingly used for reasons such as increased distributed generation (DG) and increased demand for a reliable and high-quality power supply. Because the loop distribution system involves bidirectional power flow, the method for protection of the radial distribution system cannot be applied. Therefore, a protection method is proposed herein for loop distribution systems. In this study, the existence of DG is also considered. According to the proposed method, the fault point is estimated on the basis of the equivalent circuit of the distribution system. Then, the fault section is determined and separated from the distribution system. The separation of DG is determined depending on whether the frequency and voltage are maintained within the steady state ranges. The proposed method is modelled and verified using the Electromagnetic Transients Program. Simulations according to the fault location are performed and analyzed. The results show that the method accurately determines the fault section so that normal power can be supplied to the healthy sections in the distribution system.