Harmonics in the power grid contribute to increased power losses in both the core and windings of power transformers. These losses lead to abnormal rises in temperature causing overheating and reduce the efficiency of the transformer. If the losses and temperature exceed the values set during the design stage for linear load conditions, it can damage the transformer’s insulating materials and shorten its lifespan. To assess the thermal impact of power system harmonics on transformers under steady-state and transient conditions, the rated losses and harmonic losses of the transformer are calculated. These losses are then inputted into a developed thermal 3D finite element method (FEM) performance model to determine the temperature distribution of transformer components. The numerical results from the thermal model will be compared with data from a Hyundai test report and real measurements from Egypt’s Kureimat power plant, specifically a 750 MW combined cycle power plant. The thermal modeling is focused on a step-up (16.5/240 kV), 240 ± 4 × 2.5%, 180/240/300 MVA power transformer operating in ONAN, ONAF1, and ONAF2 modes. This paper shows that the developed model aligns closely with actual measurements and the HYUNDAI test report. The loss calculations reveal that the discrepancy in total losses, with and without accounting for harmonics, becomes more pronounced as the load increases. Using this model, the presence of grid harmonics results in a higher temperature distribution across transformer components, leading to an increase in the hot spot temperature.