The invention discloses a transformer monitoring system and a monitoring method. The transformer monitoring system comprises a transformer operating condition detection device and a monitoring device, and is characterized in that the monitoring device comprises a microprocessor, a data memory and a communication module, the transformer operating condition detection device comprises a temperature detection module, a current sensor, a voltage sensor, a oil level sensor and a noise sensor, and the temperature detection module comprises a first temperature sensor, a second temperature sensor and a third temperature sensor. The monitoring method comprises the steps of firstly, detecting operating conditions of a transformer in real time, and uploading the detection information synchronously; secondly, storing operating condition information of the transformer; and thirdly, analyzing and processing the operating state information of the transformer, and outputting a fault diagnosis result. According to the invention, the temperature, current, voltage, oil level and noise of the transformer can be monitored timely and accurately, thereby ensuring efficient and safe running of the transformer, and reducing failures.