Real-time monitoring of the power cable state has tremendous significance for ensuring the safe and economic operation of mine power distribution systems. However, due to the harsh conditions of underground coal mines, it is difficult for the cable monitoring system operating in underground coal mines to carry out large-scale calculations to diagnose the grounding fault of the cable. Additionally, there are many types of cable grounding faults, such as single grounding fault and two-phase ground fault. Therefore, how to determine the type of grounding fault quickly through effective calculations and alarms to select the grounding cable is always a difficult task. In this study, to reduce the complexity of cable insulation state classification, we develop a novel classification method based on the decision tree algorithm. Concerning the zero-sequence network under different insulation conditions, the first calculation’s positive and negative values were generated to identify whether the cable insulation was symmetrical. Then, the insulation degradation phase is identified by the relationship between the three-phase voltage phase angle and the current difference variation between the beginning and end of the line. By substituting the correlation quantities collected by a wide-area synchronous measurement system into different equations, the whole grid’s decision tree was constructed in different insulation states. Then, the insulation state of each line was evaluated according to the conductance value. The effectiveness of the proposed method was verified using a 35/6 kV mine power distribution system model based on the MATLAB/Simulink platform. The test results illustrate that the method can accurately diagnose the power cable insulation state based on the decision tree of whether the grid three-phase loads operate in an ungrounded mode or not.