The insulation status of the secondary circuit in the power system plays a very important role in ensuring reliable power supply and safe production. In actual application onsite, insulation faults in secondary AC circuits often occur and are concealed. Special fault situations may lead to misoperation or refuse to operate in protection relay and automatic devices. Due to the lack of real-time monitoring methods, the status monitoring of secondary circuits still relies on manual regular inspections onsite, which not only requires a large amount of work, but also easily leads to missed detections and cannot detect accident hazards in a timely manner. This article proposes a comprehensive diagnosis algorithm for the insulation status of secondary AC circuits based on distributed zero-sequence current monitoring, waveform similarity analysis and third harmonic analysis, which can effectively improve the effectiveness of circuit insulation fault diagnosis and ensure the reliable operation of substation secondary circuits.