For the purpose of dc fault identification in multiterminal modular multilevel converter (MMC) high-voltage dc (HVDC) systems, the proposed work addresses the issues of localized protection schemes. The proposed work is focused on selectivity issues, such as differentiating between forward external and internal faults, and the classification of the type of fault contingency, i.e., pole to pole (PTP) or pole to ground (PTG) in the system. The scheme uses an equivalent network of multiterminal MMC-HVDC systems for dc fault identification. Modal transformation is used to analyze line-mode and zero-mode voltages across the current-limiting reactor (CLR) for different possible contingencies in the system. A maloperation region has been defined to address the issue of selectivity of internal HIFs and external low-impedance faults (LIFs). The rate of change of dc voltage ( <inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$dU_{\mathrm{ dc}}$ </tex-math></inline-formula> <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">/dt</i> ) is used as the mitigation technique to differentiate a HIF as high as <inline-formula xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> <tex-math notation="LaTeX">$1000 \Omega $ </tex-math></inline-formula> . Furthermore, a sensitivity function is formulated, which gives the variation of decisive parameters i.e., line-mode voltage and zero-mode voltage with respect to change in fault resistance and value of CLR. PSCAD-/EMTDC-based simulations are used to validate the performance of the proposed scheme. The scheme is validated in terms of detection time, robustness to WGN in measurement, security for ac faults, dc circuit breaker (DCCB) operation, and power reversal (load transients).