Affected by its control strategy, the output characteristics and fault characteristics of the inverter-interfaced distributed generations (IIDG) are different from those of synchro during the fault period, and the differential protection criteria applied to transmission lines cannot be directly transplanted into the distribution network. To solve the above problems, the fault characteristics of the inverter power supply are analyzed through the control strategy during the fault period, and a method to improve the sensitivity of line protection based on two-terminal dynamic impedance is proposed. The method uses the virtual part of the impedance of the two-end system and the line to construct the criterion, which avoids the influence of the traditional longitudinal differential protection on the current amplitude and phase relationship at both ends. Finally, PSCAD simulation software is used to build a 10 kV active distribution network model. The simulation results show that compared with the traditional current longitudinal differential protection, the proposed method has the advantages of high sensitivity, reliability, and strong resistance to transition resistance.