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- The power transformer is one of the very important electric facilities in power systems. Recently, current differential relay is widely used to protect such power transformer. But if inrush occurs in transformer, relay can be tripped by judging like internal fault. Therefore the correct discrimination between internal winding fault, inrush and overexcitation should be performed. This paper presents a new protective relaying algorithm which discriminates inrush, internal faults and overexcitation of transformer modelled using BCTRAN and HYSDAT of EMTP. Discrimination between internal winding fault and inrush is revealed in simulation within 1/2 cycle after fault. Accordingly, it is evaluated that the proposed algorithm has better discrimination characteristics in various cases than the current relaying for protection of transformer.