<p>Hydrolysis contributes considerably to the aging of cellulose, severely affecting the performance of oil-paper insulation. Research on the degradation of transformer kraft paper has focused on macro-analysis, represented by the decrease in mechanical strength; however, it lacks an explanation of the micro-perspectives of kraft paper hydrolysis. In this study, the mesoscopic morphology and hygroscopic behavior of kraft paper and thermally upgraded kraft (TUK) were investigated using critical-point drying, cold-field electron microscopy, and dynamic vapor sorption. With regard to the mesoscopic morphology, it was found that the mesopores of the fiber cell wall were partially preserved despite hornification during drying in the papermaking. The mesopores remained intact after the insulating oil impregnation and extraction treatment. The thermal stabilizers added in the TUK not only reduced the average mesopore area ratio by 81.8%, thereby decreasing the hydroxy group accessibility of the fiber, but also adsorbed onto the fiber surface to form a spacer layer, which hindered water molecule contact with cellulose and weakened hydrogen bond strength. As a result, the hygroscopicity of TUK at low relative humidity (RH) significantly decreased. It was a new supplement to the mechanistic explanations for the inhibition of hydrolysis in TUK. At high RH, moisture-induced swelling of the cell walls diminished the hydrophobic effect imparted by thermal stabilizers. Exposure to high RH left a moisture history that led to approximately a 20% increase in the equilibrium moisture content during subsequent low-RH re-adsorption. The study of moisture history was informative in understanding conditions of transformer service.</p>