The problem of power transformer differential protection malfunction due to inrush magnetizing current has long been considered a challenging problem. To solve the problem, different types of protection relays have been used (basic relay, percentage relay, multislop...). Each of them has its advantages and its limitations. In this paper, a digital differential relay was developed and simulated. The logic used to distinguish between inrush current and internal fault is based on the theory of harmonic analysis. The behavior of the presented relay was simulated with respect to various situations (inrush current, internal fault and external fault). The obtained results show that the proposed algorithm provides good discrimination and fast action. Index Terms: Algorithm, Differential, DSP, Digital, Power Transformer, Harmonic Analysis.I. INTRODUCTION ONE of the most important and expansive elements in power systems is the power transformer, which is used in different sizes, types and connections. A power transformer works as a node to connect two (02) different voltage levels. Therefore, the continuity of its operation is vital to maintain the reliability of the power supply [1, 2]. However, transformers are subject to numerous internal and external stresses and the consequences of any failure can be very serious in terms of damage and operational losses [3]. We therefore need high-performance and safe protection. Differential protection is widely used to protect large power transformers from internal faults. Its operating principle is based on the fact that if the difference between the input and output current in the protected area exceeds a predetermined value; the relay transmits a trip signal to the switch and isolates the faulty area. According to this principle, the relay must operate when and only when