A new Fault Current Limiter (FCL) is proposed which consists of a conventional Current Limiting Reactor (CLR) and a Thyristor-Controlled Series Compensator (TCSC) in series. In normal operation, it works to compensate for impedance of the CLR and a line, while it limits short-circuit currents during system faults. After the fault clearance, it damps power oscillations. Effectiveness of fault current suppression and damping effects on power system oscillations were studied by digital simulations and by an analogue simulator. It was found that the proposed FCL could decrease impedance of a conventional CLR reactor due to inductive impedance of the TCSC and have good damping characteristics. From investigation of cooperative protection system for the FCL, it showed that fast bypasses of the thyristors in the TCSC were useful for overvoltage protection, fault current limit and decrease in capacity of protective arresters connected in parallel with the TCSC. © 2002 Wiley Periodicals, Inc. Electr Eng Jpn, 140(3): 53–60, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/eej.2004