By analyzing the power module level failure and protection logic of modular multilevel converter (MMC) systematically, the dynamic simulation scheme is proposed,the core of the scheme is to use the powerful operation ability of the RTDS processor to send the fault setting information and firing control words to FPGA dynamically in every small step (<2.5 μs) through high-speed optical fiber communication. This scheme is suitable for real-time Hardware in Loop (HIL) simulation system consisting of the control and protection devices. It can not only realize dynamic simulation of power module fault and protection in microseconds but also realize dynamic simulation of multiple faults. Finally, aiming at MMC-HVDC unit tripping accident of China Southern Power Grid by single power module fault, the simulation model is established based on the proposed scheme and accident reappearance test is conducted, the simulation results show that the proposed scheme is effective.