Abstract: Addressing the issue that, in metal-oxide arrester, the resistive current increases as the valve discs become damp and age, yet this component is masked by the capacitive current—which accounts for more than 80% of the total current—making direct measurement difficult, as well as the insufficient theoretical basis for existing third-harmonic method criteria, this paper starts from the nonlinear voltage-current characteristics of the valve discs to analytically derive a closed-form expression for the third-harmonic content of the resistive current. Based on this, it demonstrates the monotonicity, parameter robustness, and early detection sensitivity of using the third-harmonic content ratio (HR?) of the total leakage current as a degradation criterion; Consequently, an online detection system was designed, employing a through-core TA for sampling, a fourth-order Butterworth bandpass filter to extract third-harmonic components, and windowed interpolation DFT to refine the measurements, thereby establishing a hardware-software architecture. Simulations and signal injection tests demonstrate that the device achieves 45 dB suppression of the 50 Hz fundamental frequency, with a relative error in HR? measurements of less than 1% and a minimum detectable third-harmonic current of approximately 10 μA, thereby meeting the requirements for early-stage online degradation monitoring of MOA.