Power Quality (PQ) is a major factor for utilities to consider when meeting customer demands. Poor PQ can damage sensitive equipment and lead to costly repairs, resulting in lost time, corrupt data, and lower productivity. It also increases losses, raises electricity bills, and reduces the life expectancy of electrical equipment. In this article, a fuzzy system is used to determine PQ for various operating conditions and study its effect on the performance of distribution transformers (DTs). Experiments are performed on a three-phase, 15-kVA, 400/400-V DT. The input supply voltage to the DT is intentionally disturbed by means of a motor-alternator-variacs-triacs assembly to obtain different PQ conditions. A fuzzy system is developed with offline and online approaches. This system has five measurable inputs-supply voltage, load current, frequency, harmonics distortion, and winding temperature-and one output variable, PQ. Offline and online experimental results are compared. Results show that the efficiency of a DT decreases with PQ degradation, and the proposed fuzzy system is able to make accurate diagnoses.