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Toroidal transformers are currently used only in low-voltage applications. There is no published experience for toroidal transformer design at distribution-level voltages. This paper explores the lightning impulse response of toroidal distribution transformers in order to obtain a dielectric design able to withstand standardized impulse tests. Three-dimensional finite-element simulations are performed to determine the capacitance matrix on a turn-to-turn basis. Then, a lumped parameter RLC model is applied to predict the transient response of the winding as well as to obtain the potential distribution along the winding and corresponding dielectric stresses. The model computes the impulse potential distribution and the dynamic (interturn and interlayer) dielectric stresses. Different insulation design strategies are proposed by means of electrostatic shielding and variation of the interlayer insulation.