The invention discloses a fault handling method of distribution automation equipment in a distribution system. The method comprises: a communication network is constructed by using all distribution network management equipment in a distribution network as nodes; an upstream and downstream relation of all distribution network management equipment in the distribution network is determined; a fault report is generated; according to the fault report, a substitute distribution network structure with fault equipment and/or line shielded is constructed; combination ways of on-off states of all loops and/or distribution automatic terminals during construction of the substitute distribution network structure in the distribution automation system are calculated and a corresponding control instruction is generated; and according to the control instruction, the on/off state of the corresponding distribution automatic terminal is controlled. Therefore, the real-time and automatic maintenance operation for a fault can be realized without manual intervention by the maintenance staff, so that the maintenance performance of the distribution network can be improved substantially.