In 22.9kV underground distribution system, power cables are provided with multiple-point ground in which each neutral line of the distribution cable(A, B, C phases) and three-wire common grounded at every connecting section. But in such grounding methods, circulating current flows between the neutral wire and grounding wire. And power loss due to circulating current also occurs in all conductors. Therefore it is getting necessary reducing circulating current in underground distribution system. This paper presents improved grounding method to overcome such problems. The proposed grounding method eliminates circulating current in the neutral line effectively and is verified that there is no electrical problem or any ineffectiveness of operating protection systems. These analyses are carried out by EMTP/ATPDraw to compare each grounding methods in steady and transient state. This grounding method suggested in this paper can be applied on real distribution system after field tests considering elimination of circulating current was implemented.