Installation of small generators in distribution networks has been increased recently due to its various benefits. One of the important issues related to these distributed generators is the effect of system faults on their transient stability. Due to the low inertia constant of the small-scale generators and the slow operation of the distribution networks’ protective relays, transient instability is quite probable for these generators. In this paper, the dynamic behavior of small-scale synchronous generators to the system faults and its sensitivity to the system parameters are investigated. Then, a practical protective method using theexisting overcurrent and undervoltage relays is proposed, and its advantages and disadvantages are pointed out. Next, based on the obtained information from sensitivity analysis, a novel protective relay is proposed to protect the generators against instability. The proposed relay uses a generator active power to determine the appropriate time to disconnect the generator. Simulation results confirm the secure operation and robustness of the proposed relay against system transients. In addition, the proposed algorithm complies with the generator fault-ride-through requirements.