Thermally induced defects in the encapsulated insulation layer of dry-type transformers are prominent. To detect abnormal heating of winding insulation materials in a timely manner, this paper proposes an inorganic thermochromic coating-based temperature measurement method for the encapsulated insulation layer of dry-type transformer windings and investigates its performance. The inorganic temperature-indicating material is synthesized via the liquid-phase method, and its structure and micromorphology are characterized by Fourier transform infrared spectroscopy, thermogravimetry-differential thermogravimetry (TG-DTG), and other techniques, revealing the discoloration mechanism of the material. Considering the discoloration temperature range and sensitivity, the optimal mass ratio of the components (oxalic acid, potassium oxalate, and cobalt carbonate) is determined. Temperature-indicating coatings are prepared using two different basecoats, and their composition ratios are optimized according to discoloration, adhesion, hydrophobicity, and electrical properties. The results show that coatings using RTV-Ⅱ as the basecoat have a discoloration temperature of 103~120 ℃ and a grade 1 adhesion level. The static contact angle is greater than 100° both before and after discoloration, and the surface flashover voltage exceeds 9 kV/cm. The coating achieves the best comprehensive performance when the ratio of the basecoat to thermochromic material is 10∶3. After thermal aging at 60~80 ℃ for 168 h, no obvious degradation is observed in its discoloration and electrical insulation performance. The results can provide technical support for the temperature detection and overheating warning of thermally induced defects in the encapsulated insulation layer of dry-type transformer windings.