The invention discloses an insulation state judging method and system of a power cable. The method comprises the following steps: preforming digital filtering on a zero drift problem of a magnetic modulator; performing fuzzy clustering on the filtered data; and calculating an insulation degradation probability of each power cable line by using a clustering center point and coordinates of a farthest point away from the origin. The digital filtering of the zero drift problem of the magnetic modulator comprises the following steps: calculating n initial basic value; performing arithmetic averageon the base values and a measured value; updating the basic value data; and performing Kalman filtering. According to the insulation state judging method based on the magnetic modulator proposed by the invention, the high frequency noise can be filtered based on the Kalman filtering, the low frequency fluctuation noise can be effectively filtered based on the basic value filtering, the measurementerror caused by the zero drift of the magnetic modulator can be efficiently removed, and meanwhile, the insulation degradation probability of the power cable is provided to accurately judge the insulation state of the power cable.