The work is to research the dielectric characteristics of vegetable-based oil during cyclic temperature aging and to determine the parameters necessary for monitoring the state of the oil, and to develop a method for diagnosing an insulating liquid. The research technique included measuring the dielectric constant of the oil and the tangent of dielectric loss for oil that underwent cyclic temperature oxidation. Thermal oxidation consisted in cyclic heating and natural cooling of the sample during the day without exposure to light. This was done to simulate changes of the temperature in the tank of the power transformer with a changing load schedule during the day. For comparison, the dielectric constant of the base sunflower oil was measured, which was stored in a glass container at room temperature without exposure to light. The results showed that the dielectric constant of vegetable-based oil increases linearly in the oxidation process. The increase in permittivity is associated with an increase in the number of polar molecules as a result of the formation of secondary oxidation products. Under the influence of temperature, the chemical composition of the oil changes and the primary oxidation products — hydroperoxides — are formed. Vegetable-based oil oxidation products do not form a precipitate. Instead, the oil begins to thicken and polymerize. The developed method of diagnosing of an insulating liquid is to determine a coefficient proportional to the growth rate of the number of polar molecules in oil. The results show that monitoring only the tangent of dielectric losses does not give information of the state of vegetable-based oil and is not always an indicator of oxidative processes in oil. The thermal oxidation process has a steady effect on the dielectric constant, which indicates changes of the oil as a result of polymerization.