During grid faults, the grid-forming inverter (GFMI) needs to suppress overcurrent and provide grid support. However, the grid-supporting capability is commonly overlooked while designing the current-limiting method. Therefore, a two-stage adaptive virtual impedance-based current limitation for improved grid-supporting capability is proposed. Theoretical analysis shows that the better response performance of reactive power can be achieved by setting a larger impedance ratio (n = omega L-v/R-v), but this will increase the peak magnitude of fault current. Hence, during the fault transient stage, the proposed method uses the fault voltage drop to quickly calculate the large magnitude of virtual impedance to suppress the peak magnitude of fault current. However, during the fault steady stage, the large magnitude of virtual impedance limits the capacity utilization, thus the amplitude of the fault current is used to build a state machine to further optimize the magnitude of virtual impedance, to improve the capacity utilization. Then, the fault current can be suppressed under various fault conditions and the grid-support capability of GFMI can be improved from two aspects: the response performance of reactive power and the capacity utilization. Finally, simulations and experimental results are used to verify the effectiveness of the proposed method.