Abstract: A GOOSE communication-based distributed grounding line selection method is introduced and implemented in the relay protection device. When a single-phase grounding fault happens in the small current grounding system, the fault current is quite small due to the switching of arc-extinguish coil, which makes it difficult to recognize the fault line using the conventional steady-state discrimination method. The wavelets decomposition algorithm is utilized to discriminate the transient component of current and to recognize the grounding line rapidly and accurately. The GOOSE communication of the station control layer is used to share information among several devices, and the wavelets algorithm is used to discriminate the fault line locally. The algorithm is proved feasible through MATLAB simulation, and the microprocessor protection device embedded in the algorithm is validated in the RTDS test.