Inter-turn short circuit fault is the most common fault of dry-type air-core reactor, which may cause insulation damage, fire or even burn out of the reactor in serious cases. It is of great significance for the safe operation of the power system to diagnose the inter-turn short circuit fault as early as possible and give effective early warning. A new method is presented for diagnosis of inter-turn short circuit of dry-type air-core reactor based on magnetic field detection: detection coils that are independent of the reactor body and coaxial with the reactor winding are installed up and down. By adopting the mathematical statistics 3σ Criterion model and algorithm to detect the changes of the induced voltage of the detection coils, the inter turn short circuit fault of the reactor is determined and early warning and alarm are given. In order to verify the effectiveness of the proposed method, the induced voltage changes of the detection coils are simulated and analyzed when inter turn short circuit faults occur at different positions of a BKGKL-20000-35 dry type air-core reactor based on the finite element numerical calculation software. The proposed method has also been validated through on-site prototype testing. It is reliable and effective, and can be widely applied in practical power systems.