It is well known that a partial-discharge(PD) in insulation oil is the source of various physical and chemical phenomena, such as heat, light, gas, chemical transformation, electric current, electromagnetic radiation and ultrasonics. The PD can be detected by measuring one of these changes. Although some techniques are employed in this purpose, several obstacles interfere with an on-line measurement. Ultrasonic-wave detection is a useful method for the diagnosis of the transformer-insulation condition. Conventionally, ulyrasonic waves are detected by Piezo-electric transducer, but we use optical method that has many advantages. In this paper, we constructed a Mach-Zehnder interferometer with optical fiber and investigated the principle of operation. Test arrangement is based on the needle-plane electrode system in oil and applied AC high voltage. Ultrasonic waves were detected and analyzed with wavelet transform.