Frequent changes in power grid topology bring risks to the stable operation of power systems. It is essential to identify changes in the power grid topology quickly and accurately. This paper presents a novel method named network reduction-based topology change identification (NR-TCI) algorithm to identify topology changes in multi-machine power systems. The proposed algorithm can quickly identify power grid topology changes using only phasor measurement unit (PMU) data sampled during the system’s transient process. The NR-TCI algorithm uses the network order reduction method to reduce the order of a bus admittance matrix and then uses PMU measurement data to estimate the reduced admittance matrix by least square method. Finally, the reduced admittance matrix is adopted to find topological information, and the Sherman–Morrison formula is utilized to identify the topology changes. The effectiveness of the proposed NR-TCI algorithm is verified with a case study of a 3 machine 9 bus system in Matlab. In addition, the influence of PMU sampling frequency on the effectiveness of the proposed algorithm is also studied.