Abstract: There have been problems in the existing active arc suppression devices, for example, it is difficult to obtain power at the DC side or to stabilize the DC capacitor in the steady state; and there is transient overvoltage of a grounding fault in the transient state. Aiming at these problems, this paper fully analyzes the potential of unified power quality regulator (UPQC) to actively participate in the regulation in the whole process of a grounding fault. An optimal operation of UPQC for transient- and steady-state coordinated regulation of a grounding fault in distribution network is then put forward. The device with this method is referred to as AS-UPQC (Arc Suppression Unified Power Quality Conditioner). Firstly, by analyzing the power flow direction of AS-UPQC system in the arc suppression steady-state mode, the method of active energy balance suitable for AS-UPQC is proposed. By controlling the series side of AS-UPQC to absorb certain active power from the power grid, the active power consumed during the arc suppression at the parallel side is compensated. On the premise of no additional energy storage equipment, this method effectively ensures the capacitance energy balance at the DC side of the arc suppression device. Secondly, the transient mode of a grounding fault is analyzed, and a control method of transient response optimization is proposed. At the moment of a grounding fault, the control series side absorbs the active power from the power grid, which effectively increases the system damping and speeds up the transient transition process so as to suppress the amplitude of transient overvoltage. Finally, the effectiveness and feasibility of the proposed control method are verified by simulation and experiments.