Moisture has a significant effect on the internal insulation performance of transformers, and is closely related to the breakdown voltage of transformer insulating oil. In the present work, we studied the effect of nano-SiO2 particles on the diffusion of water in insulating naphthenic mineral oil using molecular dynamics simulation. Six models were established, three of which contained nano-SiO2 particles together with water concentration of 1 wt.%, 2 wt.%, or 3 wt.%. For each model variations in free volume, mean square displacement, and interaction energy were assessed. The addition of nano SiO2 particles was found to reduce the free volume fraction of the model and as well as the free motion of water molecules in the oil. These particles also increased the interaction between the oil and water molecules, indicating that insulating oil containing nano-particles has a greater binding effect on water. The diffusion coefficient of water in oil containing nano-SiO2 particles was reduced, such that water molecules were less likely to diffuse. The results also show that these particles adsorb water molecules in the oil and to reduce diffusion. Consequently, the addition nano-scale SiO2 particles could potentially improve the breakdown voltage of the insulating oil.