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Transformer oil is widely used in electric transformers serving the dual functions as insulating medium and cooling material. However, safety and stability of power system is interrupted due to the operation failure of electric transformers in certain case. Therefore efforts should be focused on improving the property of transformer oil for the stable operation of insulating system. The purpose of this paper is to obtain a new type of nanomodified transformer oil with improved dielectric and thermal properties. Boron nitride (BN) nanoparticles with high thermal conductivity were dispersed into transformer oil to form the nanooil. Dielectric and thermal properties of the samples before and after modification were measured. Dielectric property experiments were performed in accordance with IEC standard. Discharge phenomenon in breakdown process was captured by a high speed CCD camera. In order to investigate the effect of BN nanoparticles on thermal property, temperature change and heat distribution of the samples in heat transfer process were measured by an infrared thermal imager and a temperature sensor. It is found that the nanooil has higher dielectric breakdown strength and lower dissipation factor which indicate better dielectric property compared with nonmodified oil. Obtained results show significant improvement in heat transfer process with increasing the concentration of BN nanoparticles. It is proposed that the nanoparticles create an interfacial region which contributes to the enhancement of dielectric strength. For thermal property the ballistic phonon transport of the nanoparticles acts as the key factor in the remarkable improvement. Furthermore, the improved thermal property of the nanooil has an inhibitory effect on the breakdown process according to the bubble theory. [ABSTRACT FROM AUTHOR]