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Partial discharge (PD) is one of the factors that could lead to failure of power transformers, leading to power outage and expensive repairs. The acoustic wave induced by PD can be measured and used for monitoring, diagnosing, and locating potential failures in the transformers. Fiber optic sensors have been shown to be attractive devices for PD detection because of a number of inherent advantages including small size, high sensitivity, electrical nonconductivity, and immunity to electromagnetic interference. A fiber optic sensor based on a Fabry-Perot interferometry is constructed by a simple micromachining process compatible with microelectromechanical system technology. The sensors are used in a transformer to measure PD acoustic waves. The experimental results show the sensor not only has an inherent high signal to noise capability, but is able to accurately localize the PD sources inside the transformer.