For a long time, China has paid more attention to transmission lines than distribution lines, but the multi-level branch lines of distribution networks make lightning fault location more challenging. For this reason, this paper proposes a distributed current monitoring terminal layout method for multi branch distribution lines. First, collect the parameters of 10kV distribution network in a mountain area to build the electromagnetic transient simulation model of the line, and set the monitoring intervals. Then, the propagation law of lightning current on the line when three typical lightning faults occur in each monitoring area is extracted by simulation, and the factors affecting lightning fault location and identification are analyzed. Secondly, based on the propagation law of lightning traveling wave in distribution network and its influencing factors, the layout principle of distributed monitoring terminals in distribution network and the line layout scheme are proposed. Finally, the layout scheme is verified and optimized by lightning fault location simulation. This method provides support for the application of distributed monitoring terminals in lightning fault location and identification of distribution networks, and is conducive to improving the intelligent and digital level of distribution lines.