A fault detection and isolation scheme for low-voltage dc-bus microgrid systems is presented in this paper. Unlike traditional ac distribution systems, protection has been challenging for dc systems. The goals of the proposed scheme are to detect the fault in the bus between devices and to isolate the faulted section so that the system keeps operating without disabling the entire system. To achieve these goals, a loop-type dc-bus-based microgrid system, which has a segment controller between connected components, is proposed. The segment controller consists of master and slave controllers that monitor currents and control the segment separation, which include solid-state bidirectional switches and snubber circuits. The proposed system can detect faults on the bus regardless of fault current amplitude or the power supply's feeding capacity. The proposed concepts have been verified by OrCAD/PSpice simulations and experiments on hardware test bed.