A distribution transformer or service transformer is a transformer that provides the final voltage transformation in the electric power distribution system, stepping down the voltage used in the distribution lines to the level used by the customer.  The invention of a practical efficient transformer made AC power distribution feasible; a system using distribution transformers was demonstrated as early as 1882.

Distribution transformers normally have ratings less than 200 kVA, although some national standards can allow for units up to 5000 kVA to be described as distribution transformers. Since distribution transformers are energized for 24 hours a day (even when they don’t carry any load), reducing iron losses has an important role in their design. As they usually don’t operate at full load, they are designed to have maximum efficiency at lower loads. To have a better efficiency, voltage regulation in these transformers should be kept to a minimum. Hence they are designed to have small leakage reactance.