A power distribution system capable of automatic fault detection includes a lateral, a switch unit and a feeder terminal unit. The switch unit includes a circuit breaker coupled for transmitting electrical power to the lateral when making electrical connection, and a protection relay to provide a control signal that causes the circuit breaker to break electrical connection upon determining that the magnitude of a current provided by the circuit breaker is greater than a threshold current value. The feeder terminal unit detects whether or not the protection relay generates the control signal, so as to determine whether or not a fault has occurred in the lateral.