Abstract: The present invention provides a system and method for monitoring vibration of a power transformer. The system comprises at least one vibration sensor operably mounted to the outer case of a transformer for sensing vibration of the power transformer; a spectrum analyzer for processing the vibration signal from the vibration sensor, the spectrum analyzer generating a frequency spectrum of the vibration signal and calculating a velocity rating from the frequency spectrum; a diagnosing means for evaluating the velocity rating of the vibration signal, the diagnosing means assigning a vibration grade for each velocity rating, the diagnosing means finding the maximum velocity rating; and a means for dispatching a control message to an operator when the maximum velocity rating reaches a threshold value. It can be appreciated that the mechanical health of a large-sized transformer can be managed in a systematic and efficient manner during its operation.