The invention relates to a method and a system for monitoring the insulation level of a substation power cable, which comprises a power cable insulation monitoring device based on an optimized direct current superposition method. A power cable insulation monitoring system is built based on the power cable insulation monitoring device. According to the power cable insulation monitoring device based on the optimized direct current superposition method, the same direct current voltage source is connected onto three phases of lines of a high-voltage bus respectively through three equivalent megohm-level current-limiting resistors, current is detected and sampled, a blocking capacitor is matched for use, the blocking capacitor is hooked between the primary-side neutral point of a voltage transformer and the ground, and when the insulation level of the power cable drops, the direct current can have a unique channel to conveniently and accurately calculate the direct current resistance. According to the method and the system of the invention, as the system is provided with the power cable insulation monitoring device based on the optimized direct current superposition method and the power cable insulation monitoring system is built, power cable insulation drop judgment based on the insulation monitoring system can be carried out.