It is well known that a discharge in oil is the source of various physical phenomena. Ultrasonic-wave detection is a useful method to the diagnosis of the transformer-insulation condition. Conventionally, ultrasonic waves are detected by Piezo-electric transducer, and 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.