Abstract: In view of the long-term light load operation and great loss of many residential transformers in the rural power grid in China, on the premise of ensuring the reliable operation of the equipment, this paper puts forward a distribution transformer optimization method considering the load maximum probability distribution and the fault risk cost. First of all, by considering the economic operation range of the distribution transformer and the load distribution in the substation area, the paper compares and analyzes the differences between the traditional distribution transformer selection method and the selection method proposed in this paper; a fault risk cost model is established comprehensively considering the maximum probability distribution characteristics of distribution transformer load, the fault probability and the rated capacity; on this basis, a distribution transformer model totally considering the fault risk cost of selection life cycle cost (LCC) is constructed. Finally, the economy and correctness of the proposed method are verified by the calculation of an example of a 10 kV distribution network transformer selection.