This paper presents a detailed report of the performance and impact of UPFC on the power system behavior during fault conditions. A two machine - double line power system with UPFC installed in one of the lines is considered for the study. The idea is to observe the capability of the UPFC to maintain the active and reactive power flows in the compensated line (which includes UPFC) and to diminish the fall-off of the bus voltage when there is a grounding fault in the transmission line. Simulink based power system block set is used for numerical simulations. Simulation results indicate notable improvement in the behavior of the overall system with UPFC in upholding the voltage and power flows even under typical line faults by appropriate injection of series voltage into the transmission line at the point of connection. The extent of UPFC capability in maintaining the power flows in the line (Line 1), even under fault condition in an adjacent parallel line (Line 2) is provided. Minimizing the disturbances in voltages, currents and power flows in the fault-affected line (Line 2) are also discussed. Further the results illustrate how the UPFC contributes dynamically to a faster recovery of the system to the pre-fault conditions. © 2005 IEEE.