Carbon monoxide (CO) is one of the most important fault characteristic gases dissolved in power transformer oil. With the advantages of high sensitivity and accuracy, long-term stability, and short detection time, photoacoustic spectroscopy (PAS) has been proven to be one promising sensing technology for trace gas recognition. In this investigation, a tunable PAS experimental system based on a distributed-feedback (DFB) diode laser was proposed for recognizing dissolved CO in transformer oil. The molecular spectral line of CO gas detection was selected at 1.567 μm in the whole experiment. Relationships between the photoacoustic (PA) signal and gas pressure, temperature, laser power, and CO gas concentration were measured and discussed in detail, respectively. Finally, based on the least square regression theory, a novel quantitative identification method for CO gas detection with the PAS experimental system was proposed. And a comparative research about the gas detection performances performed by the PAS system and gas chromatography (GC) measurement was presented. All results lay a solid foundation for exploring a portable and tunable CO gas PAS detection device for practical application in future.