A new fault location numerical algorithm based on terminal data and derived in time domain is presented. The fault location and its nature (arcing or arcless fault) are estimated using Least Error Squares Technique. In the paper, the arc, occurring on the fault point, is included into the problem consideration. The algorithm is derived for the case of a three-phase symmetrical fault. The results of the algorithm testing through computer simulation and under laboratory conditions are given. The influence of higher-order harmonics is investigated and presented.