Transformers require advanced insulating materials that outperform mineral oil in terms of cooling, insulation effectiveness, eco-friendliness, and operational efficiency in extreme operational and weather conditions. As a result, emphasis has shifted to renewable and ecologically friendly materials. This change in emphasis is motivated by worries about the environment, fuel shortages, and the disposal of waste oil. Transformers have historically employed solid insulators like paper and pressboard as well as mineral or synthetic oil. However, the development of ecologically friendly insulating materials has been spurred by new environmental regulations as well as economic benefits. This research investigates the use of sol-gel synthesized aluminium oxide (Al2O3) nanoparticles to improve the insulation properties of host transformer oil. The synthesized aluminium nanoparticles were characterized with X-ray diffractometer (XRD) and found rhombohedral structure, whose chemical composition was studied by energy dispersive X-ray spectrum (EDAX). Investigation using Fourier transform infrared spectroscopy (FTIR) also revealed the production of AlOOH and hydroxyl vibrational bands at wavenumbers of 690 and 2976 cm−1, respectively. Studies using field emission scanning electron microscopy (FESEM) showed that the nanoparticles are spherical in form and have a diameter of around 38 nm. Additionally, the incorporation of α-aluminium oxide nanoparticles into the host oil showed an improvement in the breakdown voltage and suggested a possible use for better transformer oil insulation.