The invention relates to a monitoring and protection system for neutral ungrounded power supply systems, including an electricity consumption information collection module, an insulation monitoring module, a transformer winding temperature monitoring module, a communication module and a microprocessor. A high-speed microcontroller chip calculates the resistance between the neutral wire and the ground wire of a neutral ungrounded power system to diagnose the insulation condition of the system, and collects the winding temperature of the transformer in the system to prevent fire caused by high temperature of the transformer. Meanwhile, in the method, each piece of electricity consumption information in the neutral ungrounded power supply system is collected for judgment and analysis, faultyarcs are captured in time, and the faulty circuit can be cut off once an arc fault occurs. A microcontroller displays the insulation resistance, transformer winding temperature, electricity consumption information data and alarm information of the system on a host computer interface via a 485 interface after collecting and processing, and the data can be transmitted via a GPRS module or an Ethernet interface to a cloud server for analysis and use by the cloud server.