This paper proposes a new distributed AC state estimation method. Different from the popular distributed state estimation (DSE) methods based on area partitioning method, the proposed method is a truly distributed method in which the power system is not required to be divided into smaller areas and a centralized state estimator in each area is not needed. In order to achieve fully DSE, the information propagation algorithm is introduced in this paper to help the distributed local state estimators share the measurement data. The information propagation algorithm is developed based on consensus protocol. The proof of the convergence of the information propagation algorithm is provided in this paper. Then, the AC state estimation method is integrated with the information propagation algorithm to realize the proposed method. The proposed method is tested in different standard power system models. The results show that the proposed method reaches the similar accuracy as the traditional centralized state estimation methods and performs faster and more accurate than the existing DSE methods.