A fault location method based on correlation coefficient was proposed in the paper for the distribution system with distributed generation (DG). At first, by acquiring the Thevenin equivalent parameters of each DG to establish simulation model of the actual distribution network. Then voltage sag feature vectors of each bus would be obtained by simulating short-circuit fault at the location of each bus, respectively. Afterwards, by calculating and analyzing the correlation coefficient between each bus and the actual fault node,, suspicious fault sections can be determined. Finally, the fault section was identified by utilizing the associated node of every suspicious fault section .The method could reduce the fault search range obviously, without a massive requirement of measuring devices, and the required data can be obtained easily. Simulation results of a 10kV distribution network with DG showed that the proposed method was accuracy and effective.