The invention provides a transformer fault discrimination and protection method. The three-phase power average Pavr of a transformer two-terminal network and the waveform chart of the three-phase power average Pavr are calculated and obtained. According to the waveform chart of the three-phase power average Pavr, the frequency F of the waveform chart of the three-phase power average Pavr is calculated, whether at least two phases of frequencies F close to 50Hz exist or not is judged, if so, transformer rush current is judged, if not, a transformer internal fault is judged, and a corresponding protection action is executed according to a judgment result. According to the method, starting from instantaneous power waveform characteristics, effective information is mined, a fast, simple, reliable and novel transformer protection method is provided, the amount of calculation is small, the setting is convenient, the method is not affected by a Y/Delta wiring side formula, the know of the leakage inductance parameter of a transformer is not needed, and compared with existing power differential method and an existing differential protection method, the method has the significant advantages of better rapidity, sensitivity and reliability.