Power flow control and fault current limitation are two major problems that require an urgent solution in a direct current (dc) grid. This study proposes a novel interline dc power flow controller having a fault current limitation capability (FCL–PFC). The proposed controller is expected to realise overall control of the internal power flow in a dc grid and to limit the fault current under fault conditions. FCL–PFC exhibits small capacity and low loss and does not require energy from an alternating current (ac) system. The topological structure of FCL–PFC is first introduced. Then, the principles of power flow control and self-power balance using the dc voltage and ac circulating current, respectively, is discussed. The control strategy under stable conditions is further designed. Based on the proposed FCL–PFC action sequence under fault conditions, this study describes the calculation and analysis of the dc fault current in different periods for maximising the fault current limitation ability of FCL–PFC. Finally, a simulation model is used in PSCAD/EMTDC to verify the power flow control and fault current limitation capabilities of the proposed FCL–PFC. The economy of combining FCL–PFC with direct current circuit breakers is analysed.