Sensors for monitoring electrical parameters over an entire electricity network infrastructure play a fundamental role in protecting smart grids and improving the network’s energy efficiency. When a short circuit takes place in a smart grid it has to be sensed as soon as possible to reduce its fault duration along the network and to reduce damage to the electricity infrastructure as well as personal injuries. Existing protection devices, which are used to sense the fault, range from classic analog electro-mechanics relays to modern intelligent electronic devices (IEDs). However, both types of devices have fixed adjustment settings (offline stage) and do not provide any coordination among them under real-time operation. In this paper, a new smart sensor is developed that offers the capability to update its adjustment settings during real-time operation, in coordination with the rest of the smart sensors spread over the network. The proposed sensor and the coordinated protection scheme were tested in a standard smart grid (IEEE 34-bus test system) under different short circuit scenarios and renewable energy penetration. Results suggest that the short-circuit fault sensed by the smart sensor is improved up to 80% and up to 64% compared with analog electromechanics relays and IEDs, respectively.