The invention relates to the technical field of direct current fault current limiters, concretely to a magnetically saturated iron core direct current fault current limiter with high inductance transformation ratio and a current limiting method. The current limiter includes an iron core, a direct current coil and a permanent magnet. The iron core is of a solid structure of in a shape like a Chinese character 'ri', and includes a left iron core column and a right iron core column which are located on the left and right sides, a middle iron core column which is located in the middle and an upperhorizontal yoke and a lower horizontal yoke which are located at the upper and lower ends. The permanent magnet includes a first permanent magnet embedded into the right sides of the upper horizontalyoke, a second permanent magnet embedded into the right side of the lower horizontal yoke and a third permanent magnet embedded into the middle of the middle iron core column. The direct current coilis wound around the left iron core column and connected in series to a direct current power grid. The current limiter does not need to be provided with a control system, can automatically and quicklyrespond to faults, quickly connect large impedance into a line and effectively limit a short-circuit fault current, does not affect normal operation of the line, and has the advantages of obvious current limiting effect, compact structure, fast response speed and high reliability.