The invention provides a distribution transformer with a built-in lightning arrester, which comprises a transformer body and a lightning protection unit, wherein the lightning protection unit is disposed inside the transformer body; the transformer body comprises a transformer winding, a transformer sleeve and a casing; the lightning protection unit is fixed on the casing; and the lightning protection unit is connected with the transformer winding through the transformer sleeve. For the transformer of the invention, the lightning arrester is disposed inside the transformer body; an insulatingoil medium is filled on the outer side of the lightning arrester; compared with the air medium when the lightning arrester is arranged on the outer side of the transformer body, the insulating performance is better; the lightning arrester is respectively connected with the high-voltage side sleeve and the low-voltage side sleeve in parallel in the neighborhood; when the distribution transformer issubjected to an attack of lightning overvoltage, the overvoltage amplitude can be effectively suppressed; moreover, by reducing the length of the connecting line, the lightning arrester has a betterrestriction effect on the pre-steep wave lightning invasion wave overvoltage, thereby effectively preventing the transformer from lightning damage.