Fault detection in microgrids is of great significance for power systems’ safety and stability. Due to the high penetration of distributed generations, fault characteristics become different from those of traditional fault detection. Thus, we propose a new fault detection and classification method for microgrids. Only current information is needed for the method. Hilbert−Huang Transform and sliding window strategy are used in fault characteristic extraction. The instantaneous phase difference of current high-frequency component is obtained as the fault characteristic. A self-adaptive threshold is set to increase the detection sensitivity. A fault can be detected by comparing the fault characteristic and the threshold. Furthermore, the fault type is identified by the utilization of zero-sequence current. Simulations for both section and system have been completed. The instantaneous phase difference of the current high-frequency component is an effective fault characteristic for detecting ten kinds of faults. Using the proposed method, the maximum fault detection time is 13.8 ms and the maximum fault type identification time is 14.8 ms. No misjudgement happens under non-fault disturbance conditions. The simulations indicate that the proposed method can achieve fault detection and classification rapidly, accurately, and reliably.