Acoustic emission monitoring is often used in the diagnosis of electrical and mechanical incipient faults in the high voltage apparatus. Partial discharges are a major source of insulation failure in electric power transformers, and the differentiation from other sources of acoustic emission is of the utmost importance. This paper reports the development of a new sensor concept-a fiber laser sensor based on a phase-shifted chirped fiber grating-for the acoustic emission detection of incipient faults in oil-filled power transformers. These sensors can be placed in the inner surface of the transformer tank wall, not affecting the insulation integrity of the structure and improving fault detection and location. The performance of the sensing head is characterized and compared for different surrounding media: air, water, and oil. The results obtained indicate the feasibility of this sensing approach for the industrial development of practical solutions.