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. The faulted phase voltage is modelled as a serial connection of fault resistance and arc voltage. The new approach does not require the line zero sequence resistance as an input datum. In the paper some important features of arc voltage are given. The algorithm is derived for the most frequent case of single-phase line to ground unsymmetrical fault. The results of algorithm testing by computer simulation and under laboratory conditions are given. The influences of remote infeed, fault resistance, higher order harmonics, network topology and other factors are investigated and presented.