To address the challenges of fault location in distribution networks with distributed generation (DG), caused by strong power flow fluctuations, weak fault characteristic signals, and limited node measurement information, a hierarchical fault location method considering optimal micro phasor measurement unit (μPMU) node configuration is proposed. First, a data preprocessing module is introduced in the fault information extraction stage to enhance the quality of data required by the fault location model. Second, the fitness function and optimization ability of the fault location model are improved to enhance fault-tolerant performance and global convergence speed. Third, to address the high-dimensional search space resulting from numerous branches and complex topology in the distribution network, an adaptive hierarchical model based on optimal μPMU node configuration is established to achieve “regional-sectional” hierarchical fault location. Simulation results based on the IEEE 33-node distribution network with DG demonstrates that the proposed method reduces the optimization node dimensionality by 54.5%, achieves a fault location accuracy of about 95%, and features short processing time, strong noise immunity, and robustness against grounding resistance. Moreover, it exhibits excellent fault location capability and fault-tolerance performance even under multiple faults and information distortion conditions.