This paper proposes a novel wavelet-transform-based directional algorithm for busbar protection. The algorithm decomposes the current and voltage signals into their first-level details, which consist of frequencies in 500- to 1000-Hz bandwidth, for generating directional signals. A high level of computational efficiency is achieved compared to the other wavelet-transform-based algorithms proposed, since only the high-frequency details at the first level are employed in this algorithm. The validity of this method was exhaustively tested by simulating various types of faults on a substation modeled in the Alternative Transients Program/Electromagnetic Transients Program. The algorithm correctly discriminated between bus faults, various types of external faults, and transformer energization even in the presence of current-transformer saturation. This paper also provides the design details of the algorithm using field-programmable gate array technology. © 2007 IEEE.