Phase-to-ground fault is the most probable fault type in power systems, which is generally limited through neutral grounding resistor. The grounding resistor may have negative impacts on the system such as decrease in sensitivity of the differential protection. Fault current limiter (FCL) is a suitable alternative for the grounding resistor. However, the input signals of differential protections may be adversely affected by the FCL, resulting mal-operation of this protection. In this study, effects of FCL installed in neutral line of power transformers on the relevant differential protection algorithms are analysed. Performance of some well-known differential protection algorithms for discrimination between internal fault and magnetising inrush currents in presence of the neutral FCL is evaluated in detail. Then, a supplementary method based on the least error squares technique is proposed to rectify the deformed portion of the current waveform due to presence of the FCL. The reconstructed signal is considered as a proper input for the discrimination algorithms. Various simulations and experiments are carried out to validate the performance of the suggested technique. The results indicate the consistency of the suggested technique for different power systems, operating conditions, and real applications.