A new algorithm based on the waveform characteristics is presented for the discrimination of the magnetic inrush current from the fault current of a power transformer. The method is implemented based on the principle that the waveform of magnetic inrush current seriously distorts while the fault current nearly keeps sinusoid. Taking the sample data of within 10 ms after protection starts， the proposed method finds the point whose absolute value reaches maximum， and calculates the difference around the peak between area of big trapezium which is made of two sample intervals and that of two small trapezium which is made of a sample interval. According to the sum of difference， the discrimination between magnetic inrush current and fault current of the power transformers can be made. Experimental results indicate that the method is not only effective under different fault conditions and fault clearance time being limited to 10 ms， but also can be realized easily and hardly affected by decaying DC components.