Dielectric loss has long been recognized as one of the most important indicators of cable insulation health. Although huge efforts have been made in the past to measure the dielectric loss of cable circuits, there has been no report of any successful on-line techniques for the purpose. This paper proposes a new on-line insulation dielectric loss monitoring method, based on separation of currents collected from the co-axial cables connecting the cable sheathes and the cable link boxes. The principle and theoretical foundation of the method are demonstrated. MATLAB simulations, based on the real cable parameters in a 110 kV cable tunnel in China, indicate the error of the proposed method is less than 1×10 -3 %. The criteria for determining the relative dielectric loss in cable segments, based on the leakage current separation results, are demonstrated at the end. Initial results and analysis of implementation of the proposed method in the real world 110 kV cable tunnel are presented.