Power transformers play a crucial role in maintaining the stability and reliability of energy systems. Accurate moisture assessment of transformer oil-paper insulation is critical for ensuring safe operating conditions and power transformers’ longevity in large interconnected electrical grids. The moisture can be predicted and quantified by extracting moisture-sensitive dielectric feature parameters. This article suggests a deep learning technique for transformer moisture diagnostics based on long short-term memory (LSTM) networks. The proposed method was tested using a dataset of transformer oil moisture readings, and the analysis revealed that the LSTM network performed well in diagnosing oil insulation moisture. The method’s performance was assessed using various metrics, such as R-squared, mean absolute error, mean squared error, root mean squared error, and mean signed difference. The performance of the proposed model was also compared with linear regression and random forest (RF) models to evaluate its effectiveness. It was determined that the proposed method outperformed traditional methods in terms of accuracy and efficiency. This investigation demonstrates the potential of a deep learning approach for identifying transformer oil insulation moisture with a R2 value of 0.899, thus providing a valuable tool for power system operators to monitor and manage the integrity of their transformer fleet.