This paper presents a magnetically controlled series compensation-fault current limiter (MCSC-FCL) which is composed of a magnetically controlled reactor (MCR) and a compensation capacitor. The device is improved from the traditional thyristor-controlled series compensation (TCSC), which has the characteristics of small output harmonics and simple control. The traditional saturated iron-core reactor is improved to increase the adjustable range of output reactance. During the fault, the MCR is connected to the grid alone to limit fault current; when the grid is normal, MCR and capacitor are used in series compensation mode. It effectively improves the utilization rate of the traditional current limiter MCR. In order to verify the effectiveness of the proposed MCSC-FCL, this paper analyzes the control characteristics of reactor models with different air gap structures by JMAG finite element analysis software, and verifies the voltage regulation characteristics and fault current limitation capabilities on MATLAB/Simulink platform.