The invention discloses a silica gel and oil level online monitoring alarm and monitoring method for a transformer breather. The silica gel and oil level online monitoring alarm comprises a tank body and a three-way pipe, wherein the tank body accommodates silica gel particles; the three-way pipe communicates with the tank body; a lower branch pipe of the three-way pipe is connected with a breather tube of an oil tank; a left branch pipe of the three-way pipe is connected with an air outlet of a hot-air blower; the left branch pipe and the lower branch pipe are provided with a left electromagnetic valve and a lower electromagnetic valve; an oil level color sensor is arranged on an oil level pipe at one side of the oil tank through a bracket; a silica gel color sensor is arranged at one side of the tank body; a conduit communicating with the lower branch pipe is arranged on the lower branch pipe; and a temporary breathing mechanism is connected with one end of the conduit. The color sensors are arranged on the breather and the oil level pipe to judge whether the colors of silica gel and oil are normal or not; and if not, abnormal information is sent out to an operator and allochroic silica gel does not need to be replaced.