Sudden changes in loading or configuration of an electrical network causes power swing which may result in an unwanted tripping of the distance relay. Hence, it becomes utmost necessary to rapidly and reliably discriminate between actual fault and power swing conditions in order to prevent instability in power network due to mal operation of distance relay. This paper proposes a novel method for the discrimination between fault and power swing based on rate of change of voltage and reactive power measured at relay location. The effectiveness of the proposed algorithm is evaluated by simulating series of power swing conditions in PSCAD/EMTDC(R) software for different disturbances such as change in mechanical power input to synchronous generator, tripping of parallel line due to fault and sudden application of heavy load. It is revealed that the distance relay gives successful tripping in case of different fault conditions and remains inoperative for power swing with the implementation of the proposed algorithm. Moreover, the proposed scheme has ability to distinguish the symmetrical and asymmetrical fault occurrence during power swing condition.