In this paper an efficient method for detection of inrush current in distribution transformer based on wavelet transform is presented. This method uses Wavelet Transform (WT) and Probabilistic Neural Network (PNN) to discriminate inrush current from other transients such as capacitor switching, load switching and single phase to ground fault. WT is used for decomposition of signals and PNN for classification. Inrush current data and other transients are obtained by simulation using EMTP program. Results show that the proposed procedure is efficient in identifying inrush current from other events.