Abstract—In this paper, a novel scheme based on Hyperbolic S-Transform (HST) is proposed for digital differential protection of power transformers. Hyperbolic S-transform is a powerful tool for non-stationary signal analysis in noisy conditions. Decision logic has been devised using extracted feature from differential currents due to transient phenomena in transformers. The HST of the differential current is calculated. Then, a Decision Index (DI) is calculated according to the spectral energy and standard deviation of the S-matrix. It is seen that DI values are different in the cases of internal faults and inrush currents. The scheme has been implemented in MATLAB environment and the inputs are differential currents derived from EMTP software. In order to simulate the internal turn to turn and turn to earth faults, the power transformer is modeled using 8×8 RL matrices obtained from the subroutine BCTRAN of EMTP software. The differential current signals are infected by noise and the robustness of the algorithm under noisy conditions is investigated.