Stacked multicell converter (SMC) is one of the well-known breed of multilevel converters. There are several modified configurations of SMCs presented in literatures. Reduced SMC is the most advanced one whose pros are reduced amount of flying capacitor causing to reduce the size and cost of SMC. This paper proposes a reduced SMC based dual function DVR which works in two modes of voltage compensator (VC) as well as fault current limiter (FCL). In the mode of VC, DVR injects required amount of voltage to restore the quality of voltage at the sensitive load side while it injects such amount of voltage to act as like as controllable inductor to increase series impedance of grid virtually. The control strategy of dual-function DVR as VC and FCL is explained and new short-circuit fault detection method is presented. Moreover, the simulation results of dual-function DVR based on the 4-cell 9-level reduced SMC are presented.