Abstract Ferroresonance is a complex phenomenon, which can result in thermal and electrical stresses on power system equipments. It can also cause chaotic oscillations in power system. In this paper, a new method is proposed to restrict and damp ferroresonant oscillations, which is based on a new of fault current limiter (FCL). In this method in order to restrict chaotic ferroresonance oscillations, a kind of fault current limiters (FCL) is used which has been used to restrict unwanted high current flow in power system before. To study the ferroresonance nonlinear dynamics, in this paper, the chaos theory is used. By using this theory, the changes in system parameters which can cause chaotic ferroresonant oscillations, can be reviewed and analyzed in details. The behavior of the system during ferroresonance occurrence, with and without using proposed FCL, is discussed in bifurcation and phase plane diagrams. By using these diagrams, the behavioral changes of the system can be easily seen in two cases. The simulation results strongly show the effectiveness of using the proposed FCL for restricting the ferroresonant oscillations.