This article presents a comprehensive model for the two-winding power transformer digital differential protection functioning research. Considered comprehensive model is developed in MatLab-Simulink dynamic simulation environment with the help of SimPowerSystems component library and includes the following elements: power supply, three-phase power transformer, wye-connected current transformers and two-winding power transformer digital differential protection model. Each element of the presented model is described in the degree sufficient for its implementation in the dynamic simulation environment. Particular attention is paid to the digital signal processing principles and to the ways of differential and restraining currents forming of the considered comprehensive model main element – power transformer digital differential protection. With the help of this model the power transformer digital differential protection functioning was researched during internal and external faults: internal short-circuit, external short-circuit with and without current transformers saturation on the power transformer low-voltage side. Each experiment is illustrated with differential and restraining currents waveforms of the digital differential protection under research. Particular attention was paid to the digital protection functioning analysis during power transformer abnormal modes: overexcitation and inrush current condition. Typical current waveforms during these modes were showed and their harmonic content was investigated. The causes of these modes were analyzed in details. Digital differential protection blocking algorithms based on the harmonic content were considered. Drawbacks of theses algorithms were observed and the need of their further technical improvement was marked.