Currently, residual current operated protective devices (RCDs) solely rely on a fixed threshold as the tripping criterion. As a result, under conditions such as improper parameter coordination, high harmonic content, and high-frequency arc pulses, there is a risk of failure to trip or unwanted tripping. Moreover, they cannot effectively distinguish true electrocution events. To address this issue, this paper proposes a novel RCD tripping criterion based on wavelet packet decomposition and dynamic feature component selection. This criterion can quickly identify various types of faults, including common ground faults, electrocution, and arcing faults. First, the fault onset moment is captured using kurtosis, a high-order statistical measure sensitive to signal impulses. The energy ratio of the differential residual current signal in each cycle before and after this moment is calculated to identify abnormal conditions in real-time. Second, the differential residual current signals from one cycle before the fault and three cycles after the fault initiation are collected for wavelet packet decomposition. The kurtosis, wavelet packet energy ratio, and sample entropy of each node component are combined to form a dynamic optimization index (DOI). The low-frequency and high-frequency signals are then reconstructed based on the contribution of each component′s DOI, highlighting the fault characteristics of different fault types in current waveforms across various frequency bands. Finally, electrical characteristics from the reconstructed signals are extracted, and fault classification is performed accurately through a two-level chain-rule approach. The proposed method has been validated on an RCD prototype. Experimental results show that it performs excellently in detecting series arcs, ground arcs, electric shock faults, and general grounding faults in low-voltage AC distribution networks. The recognition rate reaches 97. 52% , with an average diagnostic time of 79. 6 ms. This method meets the sensitivity and reliability requirements of RCDs, thereby significantly enhancing their practical application value.