The invention provides a positioning technology-based transformer substation overhauling safety protection method. The method comprises the steps of: S1, actual rails are arranged at an overhauling work area, rail positioning sensors are installed on the actual rails in a serial number order at intervals and an alarm is installed on each actual rail; S2, a monitoring system receives the serial numbers and the positioning data of the actual rails, forms line segments by connecting points one by one according to the serial number order of the actual rails on a display apparatus to form a two-dimensional overhauling work area, and arranges virtual electronic rails at a nearby position based on the two-dimensional overhauling work area; S3, overhauling workers carry portable positioning sensors with themselves, the serial numbers and the positioning data of the overhauling workers are sent to the monitoring system in real time, and alarm instructions are sent to the alarm when the actual rails are moved or the workers cross the virtual rails. The invention also provides a positioning technology-based transformer substation overhauling safety protection rail, which can guarantee the overhauling work safety through the alarm mode of combination of virtual rails and actual rails.