The invention relates to the protection study field of the shunt reactor of the primary device of a power system with extra and ultra high voltage, which discloses a protection method of the shunt reactor based on parameter identification which comprises the steps that: first, the information of the system is collected at real time and the parameter identification equation (see I at the right side) of Z with null sequence and equivalent impedance is built; then an estimation method of the minimized squares parameter is utilized to calculate inductance parameter sequence L (k) and resistance parameter sequence R (k) with null sequence and equivalent impedance of corresponding time, thus obtaining corresponding estimation values of argument and magnitude parameters (see II and III at the right side). Finally, a corresponding direction criterion and/or a magnitude criterion are/is utilized to judge whether internal failure arises in the shunt reactor or not.