In this manuscript, a novel Δ-circuit approach is proposed, which enables the fast calculation of fault currents in large islanded AC microgrids (MGs), supplied by inverter-based distributed generators (IBDGs) with virtual impedance current limiters (VICLs). The concept of virtual impedance for limiting the fault current of IBDGs has gained the interest of research community in the recent years, due to the strong advantages it offers. Moreover, Δ-circuit is an efficient approach, which has been widely applied in the past, for the calculation of short?circuit currents of transmission and distribution networks. However, the traditional Δ-circuit, in its current form, is not applicable in islanded MGs, due to the particular characteristics of such networks, e.g., the absence of a slack bus. To overcome this issue, a novel Δ-circuit approach is proposed in this paper, with the following distinct features: a) precise simulation of islanded MGs, b) fast computational performance, c) generic applicability in all types of faults e.g., single-line, 2-line or 3-line faults, d) simple extension to other DG current limiting modes, e.g., latched limit strategy etc. The proposed approach is validated through the time-domain software of Matlab Simulink, in a 9-bus and 13-bus islanded MG. The computational performance of the proposed fault analysis method is further tested in a modified islanded version of the IEEE 8500-node network.