The access of the medium-voltage (MV) microgrid changes the radial structure of the traditional distribution network, causing the distribution network to operate in a multi-terminal power supply mode. The single-phase grounding (SPG) fault is a frequent fault type in distribution system, and multi-terminal power supply operation complicates the grounding fault characteristics of the distribution network. Thus, the traditional SPG line selection method is no longer applicable. This paper analyzes the network structure of the MV microgrid and the MV distribution network and establishes a multi-level multi-terminal power supply distribution network model with MV microgrid access. Then, the SPG fault characteristics of the multi-terminal power supply distribution system under the small current grounding mode are analyzed from the perspective of two-level bus nodes. Furthermore, based on the analysis of fault characteristics, a line selection method suitable for multi-terminal power supply networks with microgrid access is proposed, and a detailed design is carried out in terms of equipment layout and line selection task allocation, forming a relatively complete automatic line selection system. At the same time, the proposed line selection scheme is based on the two-level bus nodes, which can be analogously applied to the multi-level multi-terminal power supply distribution network. The simulation results show that the proposed line selection scheme can be effectively applied to the multi-terminal power supply distribution network with MV microgrid access.