Utilising dissolved gases analysis, a new insulation fault diagnosis methodfor power transformers is proposed. This method is based on the group grey relational grade analysismethod. First, according to the fault type and grey reference sequence structure, some typicalfault samples are divided into several sets of grey reference sequences. These sets are structuredas one grey reference sequence group. Secondly, according to a new calculation method of the greyrelational coefficient, the individual relational coefficient and grade are computed. Then accordingto the given calculation method for the group grey relation grade, the group grey relational gradeis computed and the group grey relational grade matrix is structured. Finally, according to therelational sequence, the insulation fault is identified for power transformers. The results of alarge quantity of instant analyses show that the proposed method has higher diagnosis accuracy andreliability than the three-ratio method and the traditional grey relational method. It has goodclassified diagnosis ability and reliability.