In this paper, criterion and algorithm for on-line dissolved gas of a Power transformer are studied. For the initial diagnosis of a power transformer, the on-line dissolved gas analysis is one of the most important and acceptable item to preventively diagnose a power transformer. But the criterion and algorithm of this item are not established yet in korea. In this paper, criterion and alarm level of the on-line dissolved gas analysis are based on the analysis of on-line data of operating transformers, Korea industrial standard and operation manual for a power transformer as well as accumulated data of the preventive diagnosis systems which have been operated at nine substations of Korea Electric Power Co.(KEPCO) since 1997, Therefore, the criterion and alarm level proposed in this paper are to be well suitable and are adaptable for the domestic operational environments and conditions of the power transformer. Considering that the conventional diagnosis system is capable only of accumulating and monitoring data of the power transformer operation, the criteria and the algorithms make it possible to accomplish an ultimate goal of the preventive diagnosis system. It is expected, therefore, that they will have a beneficial effect on broad applications of the preventive diagnosis system and the achievement of manless substation system in the future.