Mineral oil is commonly used as an electrical insulating oil in transformers because of its relatively high electrical insulating ability and fluidity. Considering the depletion of resources and environmental problems, however, fatty acid esters synthesized from natural plant oils are attracting attention as an environmentally friendly insulating oil. In addition, fatty acid esters such as methyl octanoate, methyl dodecanoate, 2-ethylhexyl octanoate, and 2-ethylhexyl dodecanoate have high fluidity, and also show excellent moisture tolerance against dielectric breakdown compared to mineral oil. In the present study, to clarify the reason for the superior moisture tolerance of fatty acid esters, the status of dissolved water in esters is investigated with IR spectroscopic measurements and density functional theory (DFT) calculations. It is revealed that water molecules in fatty acid esters are trapped by the ester moiety of fatty acid esters. As a result, fatty acid esters have a higher moisture tolerance against dielectric breakdown than mineral oil.