Power quality means the fitness of electrical power and its stabilized disposition to power consumer device. The quality of power supplied is affected by various factors of the power system. Any issue that results in the breakdown or malfunction of consumer electronics is referred to as a power quality problem. These includes various disturbances such as voltage fluctuations, transients, harmonics, voltage unbalance, flicker and waveform distortions that results in malfunction of end user equipment. The causes of power quality issue includes starting of large loads, fault happen on the system, switching of capacitor bank etc. In Bahir Dar Town Substation II/ Air Force Distribution feeder or R1-G4 is affected by voltage sag, due to short circuit fault happed on the system, voltage swell and total harmonic distortion due to nonlinear loads. Those have caused damage to the distribution system network equipment, including protective equipment and load-sensitive devices. There are many methods to overcome this problem. These includes, using the power custom devices, Fault Current Limiter-Dynamic Voltage Restorer, Unified Power Quality Conditioner etc. In this research dual function fault current limiter-dynamic voltage restorer (FCL-DVR) topology is proposed. The proposed structure can perform both compensate supply voltage fluctuations as well as limit fault current. The proposed device intended to deliver increased dynamic performance, a cost-effective, compact and a quick response time to network outages. The performance ability of the proposed device has been investigated by MATLAB Simulink. When the system is disturbed to a short circuit fault which magnitude is 1500A the supply voltage and load voltage has been distorted in 0.55pu, then by using this device the fault current was limited to 481.5A and the simulation has shown that the voltage is improved to 1.011p.u. Different scenario such as, single line to ground fault, double line to ground fault and three phases to ground fault have been realized to verify the operation and performance of the designed system in the MATLAB/Simulink program. Voltage sag, voltage harmonics, and voltage swell are mitigated by using controllers. The voltage source with total harmonics distortion of 16.50% were reduced to 0.11% in single line to ground fault, 46.88% to 0.13% in double line to ground fault and 42.76% to 0.15% in three line to ground fault and the voltage swell also compensated from 1.141pu value to 0.987pu value and its total harmonic distortion values also reduced from 48.73% to 0.20% after FCL-DVR compensation. Keywords: Dynamic Voltage Restorer (DVR), Fault Current Limiter (FCL), Fault Current Limiter Dynamic Voltage Restorer (FCL-DVR) Unified Power Quality Conditioner (UPQC).