In this paper, a novel method based on online monitoring of Instantaneous Exciting Current Space Phasor is presented in order to detect inter-turn faults on the transformer windings. This approach detects winding faults by comparison between presentation of the Instantaneous Exciting Current Space Phasor under healthy and faulty condition. In this work, the angular speed of Instantaneous Exciting Current Space Phasor has been introduced as one of the fault detection tools that has good sensitivity for detection of minor inter-turn faults. Firstly, a typical transformer is simulated based on Finite Element Analysis (FEA) to investigate the transformer behavior under different conditions. Then, the accuracy and performance of proposed diagnosis technique are studied by applying it to the simulated transformer.