This thesis is concerned with fault current limiting in distribution networks using interline dynamic voltage restorer (IDVR). An important problem in modern distribution networks is the increased short circuit current level which is caused by the development of power systems. As a result, fault current limiters (FCL) are sometimes considered to decrease short circuit current level and restore the voltage at the point of common coupling (PCC). In this study, an interline dynamic voltage restorer is proposed as a downstream fault current limiter in distribution networks. The dynamic voltage restorer (DVR) is a series compensator used in protecting sensitive loads from adverse effects of voltage sags and swells. Provided that different sensitive loads are fed on distinct and independent feeders with different DVRs in each feeder, then it is possible to connect the dc bus of different DVRs and form an IDVR. In the IDVR structure, two or more DVRs in different feeders are connected to a common dc link. In the event of any voltage variation in one feeder, the DVR in that feeder carries out voltage compensation, while other DVRs connected to the dc link replenish the dc link energy storage. In this structure, the required real power to compensate voltage variation in faulty feeder can be supplied from healthy feeder through the common dc link. In addition to compensating voltage variation, the DVR can also be used as a fault current limiter. In other words, the DVR is equipped with additional controls and enable it to limit the downstream fault current. Thus replacing the DVR with the IDVR would diminish the cost of the energy storage instruments and also maintain the dc link voltage at a specific level. In this thesis, the expressions governing the steady-state operation of an IDVR are obtained in the presence of balanced and unbalanced faults. The limitations in terms of real power exchange between two feeders in an IDVR structure is determined. The injected voltage, active and reactive power characteristics for both healthy and faulty feeders are derived. The addition of any fault current limiter will interfere with existing protection systems in a distribution network. In order to investigate the coordination of overcurrent relays in the presence of the IDVR as a fault current limiter, a sample network is simulated using DigSILENT v.15.1. Consequently, relays' new setting are adjusted based on limited current level. This study also presents and evaluates a multi-loop control strategy to achieve the optimum performance of an IDVR when employed as FCL. The operation of controllers is investigated by the help of simulations carried out in PSIM software environment. The results of the simulation study indicate that the control scheme used in the DVR of faulty feeder can limit the downstream fault current to twice of the nominal load current and restore the point of common coupling voltage. On the other hand, the results demonstrate that the proposed control scheme for the DVR at healthy feeder is effective in control the required real power for limiting downstream fault current. Keywords: Fault Current Limiter, Dynamic Voltage Restorer, Interline Dynamic Voltage Restorer.