One of the most difficult problems in compensated distribution networks is the grounded fault location. This paper proposes a new method for locating single-line-to-ground (SLG) faults in compensated distribution networks. The grounded fault location system is made up of the host, the controller, the signal generator and the grounded fault indicator (GFI). When a SLG fault occurs, the fault phase is identified firstly, and then a signal generator paralleled with the arc suppression coil injects a special current into the system. Subsequently, GFIs along the fault phase are activated to sample the fault phase current and send it back. The fault phase current is computed by the host with a fast Fourier transform algorithm. By comparing these frequency components of the fault phase current, the fault section is identified based on the significant difference of the second harmonic of two adjacent GFIs. Due to the short length of feeders, the distance between two adjacent GFIs is short enough for line patrol personnel to find and repair the fault easily. Finally, a modified IEEE 13-node feeder test is constructed in PSCAD/EMTDC to evaluate this method. The simulations results confirm the validity of the proposed approach.