This paper proposes a three-winding transformer protective relaying algorithm based on the ratio of the induced voltages (RIV). The RIV of the two windings is the same as the turn ratio for all operating conditions except an internal fault. For a single phase and a three-phase transformer containing the wye-connected windings, the induced voltages of the windings are estimated. For a three-phase transformer containing the delta-connected windings, the induced voltage differences are estimated using the line currents, because the winding currents are practically unavailable. The algorithm can identify the faulted phase and winding if a fault occurs on one phase of a winding. The test results clearly show that the algorithm successfully discriminates internal winding faults from magnetic inrush. The algorithm not only does not require hysteresis data but also can reduce the operating time of a relay.