This paper describes a transformer protection relay based on induced voltages. The ratio of the induced voltages of the primary and secondary windings is equal to the turns ratio during normal operating conditions such as magnetic inrush, overexcitation, and steady state, but it differs from the turns ratio in the case of internal faults. For a single-phase and a three-phase Y-Y transformer, the induced voltages are estimated and the ratios are compared with the turns ratio. For three-phase Y-Δ transformers, the differences between the induced voltages are estimated to use the line currents because delta-winding currents are practically unavailable. The proposed relay is tested under various conditions such as magnetic inrush, internal winding faults, overexcitation, and different core characteristics. The results evidently indicate that the relay successfully discriminates internal faults from magnetic inrush and overexcitation. This paper concludes by implementing the relay into a TMS320C6701 digital signal processor and reports satisfactory results. The relay requires no hysteresis data and can reduce the operating time of a relay.