Methanol is a unique aging marker of cellulose in oil-paper insulation. Headspace gas chromatography/mass spectrometry and spectrophotometry are the main methods for measuring methanol, which have a complex and long testing process. Raman spectroscopy and infrared spectroscopy also make it difficult to realize the perception of low-concentration (ppm) methanol. This paper proposes a new method for non-destructive detection of trace methanol in insulating oil by utilizing terahertz detection technologys sensitivity to polar substances. The insulating oil samples containing methanol were completed with Karamay #25 mineral insulating oil and chromatographic grade methanol. The concentrations were 99, 59. 4, 19. 8, 9. 9, 4. 95, 2. 48, 1. 24, 0. 62, 0. 31, and 0. 15 ppm. Detection of the terahertz absorption spectrum showed a characteristic peak around 1. 7 THz, which exhibits satisfactory quantitative correlation with methanol concentration in oil, and the minimum detection limit of 0. 15 ppm trace methanol in the new insulating oil was preliminarily realized in the laboratory. Quantum chemical analysis methods can be used to study the interaction between molecules and molecules. The complex intermolecular force between methanol and the insulating oil that causes cooperative vibration between oil and methanol molecules is the mechanism of characteristic peaks in the terahertz frequency band. Meanwhile, hydrogen bonds are formed between methanol molecules for easy association. Therefore, the different association ratios of methanol molecules with different concentrations of insulating oil molecules result in a nonlinear relationship between the intensity of the absorption peak and the methanol concentration. The terahertz spectrum of aged insulating oil containing trace methanol also demonstrates an absorption peak at approximately 1. 7 THz. The intensity of the absorption peak increases with the increase of aging days, and the increase is nonlinear with the degree of aging at the same methanol concentration. This finding may be related to the content of pyrolysis products of insulating oil in different periods. Polymer and insulating oil exhibit low absorption of terahertz waves. We will reduce the lower limit of the test and eliminate the influence of aging factors by further increasing the optical path, analyzing the cooperative vibration mechanism of insulating oil aging products and methanol, and utilizing adaptive big data signal extraction algorithms in future investigations to achieve the accuracy of the methanol content in the nondestructive measurement of full-cycle insulating oil and realize the rapid in situ detection of low-concentration methanol in the insulating oil of the transformer.