Phasor-based differential protection is widely used as the main protection function of the power transformer due to its reliability and ability to discriminate internal from external faults and inrush currents. However, these methods present some delays due to phasor convergence during the fault occurrence and can fail during challenging situations, such as transformer energizations with low second-harmonic content and turn-to-turn and turn-to-ground internal faults. This paper proposes a novel time-domain power transformer differential protection based on Clarke and wavelet transforms with only one differential unit and with automatic setting to be used in any power transformer. Considering both actual and simulation data, the performance validation reveals that the proposed method is efficient, ultra-fast, simple, and independent of the fundamental and harmonic components of the differential current. The method was also implemented in a real-time digital simulator to demonstrate its practical feasibility.