Cellulose insulating paper is widely used in oil-immersed transformers due to its excellent dielectric properties and compatibility with insulating oil. However, during transformer operation, it is subjected to combined mechanical vibrations and electrical stresses, which place high demands on its mechanical strength and long-term stability. In this study, molecular dynamics simulations were conducted to investigate the effects of modifying cellulose insulating paper with a hybrid of nano-boron nitride (BN) and nano-polyhedral oligomeric silsesquioxane (POSS). Both physical and chemical modification strategies were considered. The results showed that chemical modification significantly reduced the mean square displacement of cellulose chains, indicating improved thermal and structural stability. Moreover, both physical and chemical modifications enhanced the mechanical properties of the insulating paper, such as tensile strength and elasticity. Notably, chemical modification demonstrated superior performance in terms of stability and durability. These findings suggest that hybrid nano-modification, particularly via chemical bonding, holds strong potential for improving transformer insulation performance.