The invention discloses a transformer internal short-circuit fault protection device and a control method thereof. The device comprises a first current transformer, a second current transformer, a third current transformer, a controller and a quick switch. A first end of the first current transformer is connected with a main current-carrying contact of a first switch in a change-over switch, a second end of the first current transformer is connected with a first end of the quick switch, and a second end of the quick switch is connected with a first contact of a tapping selector. A first end ofthe second current transformer is connected with a main current-carrying contact of a second switch in the change-over switch, and a second end of the second current transformer is connected with a second contact of the tapping selector. The third current transformer is arranged on an outgoing line of an on-load voltage regulation tapping switch. The output ends of the first current transformer,the second current transformer and the third current transformer are all connected with the input end of the controller, and the output end of the controller is connected with the control end of the quick switch. The problem that the position of a fault point in a transformer cannot be judged in the prior art can be solved, and accurate protection can be achieved.