This paper proposes a current differential relay for transformer protection that operates in accordance with a blocking method based on the difference-function of a differential current. For magnetic inrush and over-excitation, discontinuities in the first-difference function of the differential current arise at the points of inflection, which correspond to the start and end of each saturation period of the core. These discontinuities are converted into the pulses in the second- and third-difference functions of the differential current. The magnitudes of the pulses are large enough to detect saturation of the core. A blocking signal is issued if the magnitude of the third-difference function exceeds the threshold and is maintained for three quarters of a cycle. The performance of the relay is assessed under various conditions with magnetic inrush, internal faults and external faults. The proposed blocking method can improve significantly the operating time of a relay and achieve high sensitivity of a relay.