Aiming at the accident of open flames and smoke caused by turn-to-turn short-circuit fault of dry-type air-core reactor which can’t be identified quickly, by combining theory, simulation and test, this paper studies the scheme of online current monitoring system of dry-type air-core reactor based on Faraday magneto-optic effect. Results of verifiation test indicates three points. Firstly, optical signal is used in data transmission, which can effectively avoid the influence of strong magnetic field generated by air-core reactor on signal transmission. Secondly, the monitoring system could determine the turn-to-turn insulation fault within three cycles (0.06 s) by monitoring the current in spider arm and avoid the further expansion of accidents. Thirdly, the fault position of dry-type air core reactor can be located through data analysis and post-processing. The research results show that this monitoring system could effectively improve the online monitoring level of power transmission and transformation equipment status and provide an effective technical means for turn-to-turn insulation fault monitoring of dry-type air-core reactor.