This paper develops a novel dynamic correction method for the reliability assessment of large oil-immersed power transformers. First, with the transformer oil-paper insulation system (TOPIS) as the target of evaluation and the winding hot spot temperature (HST) as the core point, an HST-based static ageing failure model is built according to the Weibull distribution and Arrhenius reaction law, in order to describe the transformer ageing process and calculate the winding HST for obtaining the failure rate and life expectancy of TOPIS. A grey target theory based dynamic correction model is then developed, combined with the data of Dissolved Gas Analysis (DGA) in power transformer oil, in order to dynamically modify the life expectancy calculated by the built static model, such that the corresponding relationship between the state grade and life expectancy correction coefficient of TOPIS can be built. Furthermore, the life expectancy loss recovery factor is introduced to correct the life expectancy of TOPIS again. Lastly, a practical case study of an operating transformer has been undertaken, in which the failure rate curve after introducing dynamic corrections can be obtained for the reliability assessment of this transformer. The curve shows a better ability of tracking the actual reliability level of transformer, thus verifying the validity of the proposed method and providing a new way for transformer reliability assessment. This contribution presents a novel model for the reliability assessment of TOPIS, in which the DGA data, as a source of information for the dynamic correction, is processed based on the grey target theory, thus the internal faults of power transformer can be diagnosed accurately as well as its life expectancy updated in time, ensuring that the dynamic assessment values can commendably track and reflect the actual operation state of the power transformers.