The existing transformer protection principle based on the transformer model casts off the influence of magnetizing inrush, however, the error caused by the imbalance of winding parameters may result in the mal-operation of protection. Based on the loop equations of transformer model, utilizing the unbalanced current in the delta windings to establish the relations among the three-phase loop equations, a winding unbalanced parameter loop equation under the normal operation is obtained. The novel loop equation takes into account the influence that a random phase of delta windings acts on the other two phases. According to the characteristic that the equation is not valid while the winding parameters change due to the occurrence of internal faults, a novel transformer protection principle based on the winding unbalanced parameter loop equation and its criteria are proposed in this paper. The test results demonstrate that the proposed principle can recognize the internal faults reliably and quickly, rising superior to the magnetizing inrush.