A wavelet-based digital directional relay for power transformer protection, implemented using field programmable gate array. The general purpose SPARTAN3E FPGA kit was employed for developing the prototype relay, with all the coding done using the hardware description language VHDL. The relay logic consists of two parts: disturbance detection based on first-level high-frequency details of the voltage signals and fault discrimination using a power-based directional signal derived from the first-level high-frequency details of both voltage and current signals. The real-time windows target Toolbox of MATLAB was used to apply the current and voltage input signals to the prototype relay in real-time. The logic is deterministic, computationally efficient, fast, secure and highly reliable. The operating time is 6ms, about one-third of power frequency cycle (20ms). The scheme uses only the sign of the directional signals, rather than the difference in their magnitudes, hence it can work reliably in the presence of fault resistance and current transformer saturation. The validity of the proposed logic was exhaustively tested by simulating various types of internal and external faults, energisation conditions and load variations on a 132kV system modelled in EMTP/ATP with a 31.5MVA, 132/33kV, Y-Δ transformer. The relay was able to correctly discriminate between internal faults, external faults and non-fault disturbances for the entire 880 test cases. © The Institution of Engineering and Technology 2008.