The inventive Limited perimeter Vector Matching fault localization method and system is launched when alarming sinks are identified. Each alarming sink broadcasts its node ID and path length, and all nodes compare their paths to identify an executive sink, which creates an Affected Link Vector consisting of the links in its lightpath, for multicast within a limited perimeter thereabout, the perimeter comprising all nodes within a neighborhood size. Each recipient returns an outcome vector corresponding to the ALV, together with a status, which indicate if the corresponding lightpath is healthy. For failed lightpaths, corresponding cells of the binary vector are set and cleared otherwise. For healthy lightpaths, bits are inverted. The vectors are ANDed by the executive sink to identify the disconnection. The exercise could be repeated for a progressively larger limited perimeter. The affected path is restored by link restoration. Multiple fault localization exercises may be simultaneously performed.