An approach to loss reduction for a distribution transformer is presented. Particular emphasis is put on optimisation of no-load loss, i.e. iron loss. The object of investigation is an oil immersed three-phase transformer 50 kVA, 20/0.4 kV, Yzn5, from the production program of the factory 'Rade Koncar' in Skopje. First, the new prototype transformer with increased efficiency and reduced mass has been designed and built; computed results are validated and proved through measurements. After, an investigative study on further reduction of the transformer iron loss is presented.