To avoid the mal-operation of transformer differential protection when outer-zone fault occurs under current transformer (CT) saturation and the refusal-operation of the protection when inner-zone fault occurs under CT saturation, a new method based on modified Empirical Mode Decomposition (EMD) and revised grey relation is proposed in this paper. A new waveform is obtained by a symmetric transformation of the initial part of differential current after fault occurred. Then a sine signal with low amplitude is added on the new waveform. And the modified EMD is applied for the composite waveform to get its first Intrinsic Mode Function (IMF1). Then calculation of the grey relation between the composite waveform and its IMF1 is made. Due to the new method just taking the initial part of the differential current as well as the significant difference between the outer-zone and inner-zone grey relation, it is able to distinguish the two fault types quickly and accurately. Consequently, when CT goes into saturation, it can ensure that the differential protection will not operate at out-zone fault and trips correctly at inner-zone fault. Simulation results of PSCAD and Matlab validate its feasibility and availability.