This paper proposes a dynamic current limit for modular multilevel converters (MMCs) that maximizes the injection of current during grid faults in order to mitigate the voltage dip, reduce voltage imbalances in case of an asymmetrical fault, and ensure the proper operation of protective relays. The reduced short-circuit capacity of MMCs, and power converters in general, is one of their main limitations. In the event of a fault, the converter’s current is significantly lower than that of the synchronous generators, which may impact both the performance of power system protective relays and the mitigation of voltage drops during faults. Usually, to protect the MMCs themselves, their output current is limited by their control. However, the current flowing through the power semiconductors is the arm current, not the output current, and this consists of an AC and a DC component. A new current saturation strategy aiming at maximizing fault current injection, in compliance with the most recent grid codes, is proposed. This strategy limits the arm currents by dynamically adjusting the output current limit while injecting reactive currents (both positive- and negative-sequence) and active current according to the grid codes, the fault type, and voltage sag level. A theoretical analysis is carried out to determine the maximum current injection that will not exceed the arm limits, and this is then validated through detailed PSCAD simulations. With the proposed strategy, the supplied current can be increased by approximately 40%.