Abstract: The contradiction between the expanding scale of urban distribution networks and the demand for highly reliable power supply has become increasingly prominent. This paper focuses on the technical practice of "multi-level coordination and precise self-healing," proposing a fault handling system that integrates optimized differential protection, intelligent switch numbering, and reconstructed self-healing strategies. By establishing a four- or five-level differential protection architecture, coupled with the iterative application of differential timing and self-healing logic in spring-operated or permanent magnet-operated circuit breakers, the system achieves precise fault isolation and swift power restoration in non-fault areas. This offers a replicable solution for enhancing the reliability of high-density urban distribution networks.