The invention discloses an active closed loop power distribution network protection system and a method. The active closed loop power distribution network protection system comprises that: an outlet circuit of a transformer station is successively connected to multiple nodes to form a closed loop network; a wire outlet protection device is positioned at the outlet of the transformer station, which adopts the overcurrent principle and is used as a backup of the whole looped network; each of the nodes is provided with a protection terminal unit; the connection part of each node is provided with a current mutual inductor; the protection terminal unit can realize various protection functions; the protection terminal unit collects input signals collected by current mutual inductors of the nodes and performs bus protection according to the input signals; the overcurrent principle is adopted to perform load protection on the connection wire of the node which is connected to loads; and the longitudinally-connected protection is performed according to the input signal collected by the current mutual inductor on the corresponding connection wire and current phase angle changing direction signal of another node which is connected through the connection wire. The invention can accurately the distribution network faults of different positions, can effectively solve the condition that the fault current amplitude is too small and can accurately determine the fault.