This paper presents a novel wavelet based approach for fault location using voltage transient wave forms in power distribution systems. The proposed method includes two main stages. Firstly, the approximate location of the fault or fault section is determined using a new algorithm with FFT transform. The accurate location of the fault is determined in the second stage. Depending on the determined fault section, the amplitude of the voltage transients and the difference between arriving times of transient components are used. The time difference are calculated using discrete wavelet transform (DWT). The proposed technique is implemented on 34 bus distribution system which is simulated in PSCAD. The comparison of the results of the proposed method with previous works verifies its better accuracy.