The objective of this paper is to analyze power system dynamics influenced by UPFC(Unified Power flow Controller) operation and to develop a refined DCRM(Differential Current Relaying Method) to protect the transmission line with UPFC effectively. The implementation of control strategies for UPFC introduces new power system dynamic problems that must be considered while applying the conventional DCRM. In this paper, impact of UPFC operation on the DCRM has been reviewed and a refined DCRM has been proposed to detect faults properly in spite of UPFC operation. The porposed method is verified by simulation on the line-faulted system with UPFC.