Power transformers are important in the power transmission and distribution network. A continuous monitoring of the transformer is important in ensuring the prolonged service of the transformer. This paper focuses on the characterization of transformer oil using optical detection method. 10 Transformer oil samples from the main tanks and 11 oil samples from the onload-tap-changer (OLTC) were obtained for the optical characterization from 200 to 3300 nm. Based on the conventional results interpretation using dissolved gas analysis (DGA) and Duval Triangle, the optical characteristics of the samples in 2120 to 2220 nm clearly demonstrate the detection of electrical discharges of high energy (D2), electrical discharges of low energy (D1) and thermal faults at temperatures above 700°C (T3) faults. This approach provides a quicker and cheaper method to determine the condition of power transformers based on the optical characteristics of transformer oil.