Reliability evaluation of phasor measurement unit (PMU) is a primary key element in the reliability evaluation of wide-area monitoring system (WAMS). In this paper, a comprehensive reliability evaluation method based on Monte Carlo dynamic fault tree (MCDFT) analysis is proposed to conduct the reliability evaluation on PMU. The reliability model of PMU is constructed using dynamic fault tree modeling and analyzed using Monte Carlo simulation to evaluate the reliability indices of PMU. The validity and advantages of the proposed MCDFT reliability evaluation of PMU were verified with simulation and comparison studies. Importance analysis showed that basic components in the GPS receiver and CPU hardware modules have high impacts on the reliability of PMU. Sensitivity and redundancy design analysis are then applied to conclude that the redundancy design of GPS receiver and CPU hardware would be the best measure for improving the reliability of PMU. Finally, a self-adaptive wide-area damping control scheme is taken as an example for the application of PMU reliability.