DC fault location technology is crucial for estimating the fault location and developing multi-terminal direct current (MTDC) systems. This article presents a novel fault location method using the parameter fitting approach. The propagation of traveling waves (TWs) in the decoupled line-mode fault network is first discussed, resulting in analytical expressions for the backward line-mode current TWs containing fault location information. Then, the adaptive multi-step Levenberg–Marquardt (AMLM) algorithm is applied for parameter fitting owing to its fast processing speed and precision. The exact fault location is estimated using the fitted coefficient. Different testing MTDC systems modeled in PSCAD/EMTDC and a real-time digital simulator (RTDS) validate the proposed fault location method. Based on numerous simulation tests, the AMLM-based parameter fitting and the proposed method are accurate, with errors smaller than 0.5%. Compared to the existing methods, the proposed method has desired performance under close-in faults, can withstand 35 dB noise interference, and obviates the need for an extremely high sampling frequency, estimation of tws velocity, and communication devices.