Abstract: The prevailing methodology used to identify the severity of transformer inner faults is based on the total gas concentration and its rate of change, without recurring to the energy of formation difference between gases. By means of enthalpy analysis, the thermal decomposition mechanism and thermal fault severity diagnosis criterion of transformer oil were studied in this paper. Based on the thermodynamic theory, C20H42 was selected as a model compound to study the decomposition mechanism of transformer oil, and the amount of individual gas with regard to different temperature was calculated. The energy of formation for each gas that can characterize the energy change during the reaction process was obtained, indicating the energy required to form the gases was in the order of: CH4 ＜ C2H6 ＜ C3H8 ＜ C3H6 ＜ C2H4 ＜ H2 ＜ C2H2. Futhermorre, an energy-weighted total dissolved gas analysis scheme was proposed, which formed a new criterion to evaluate the severity of transformer thermal faults. Field cases verification of thermal faults in transformer oil show that, compared with the traditional DGA method, the new proposed method renders preferable sensitivity and accuracy.