A transformer links a furnace's high-voltage and low-voltage circuits together. The transformer gathers its high-voltage power supply from wires that connect to the furnace's electricity feed. It then reduces the voltage, typically to 24 volts, before entering the furnace's low-voltage control circuit. In many cases the transformer's output side wires directly to the thermostat. Transformers use two sets of wire coils that wrap around an iron core. As electricity flows through the high-voltage coil, a magnetic field develops in the iron core. The second coil uses this magnetic field to produce a low-voltage power source.

Separate and identify the transformer's wires. The wiring guide printed on the side, or top, of the transformer lists the color-coded wires and what they connect to. Two wires lead to the high-voltage power source, labeled "Primary," and two lead to the low-voltage circuit, labeled "Secondary." The primary side will identify the "Hot" wire and the "Neutral" wire. The secondary side uses "24VAC" and "Ground" or "Common" labels for its respective wires.

Loosen the terminal strip's secondary retaining screws with a slotted screwdriver. The terminal strip holds the wires that enter the furnace and the wires that lead to the furnace's high-voltage parts. The terminal strip contains two halves, called "L1" and "L2." Each half contains a primary and a secondary side. The wires that enter the furnace connect to the primary side of the terminal strip and the wires that lead to the furnace's parts connect to the secondary side.

Push the transformer's "Hot" wire into the "L1" terminal strip and tighten the screw with a slotted screwdriver. This wire often uses black insulation.

Push the transformer's "Neutral" wire into the "L2" terminal strip and tighten the screw with a slotted screwdriver. This wire often uses white insulation.

Connect the transformer's ground, or common, wire to the furnace's ground screw. The ground screw, colored green, connects to the furnace's housing. Some furnace models use a metal terminal strip where all low-voltage common wires connect, instead of a ground screw. This wire often uses yellow insulation.

Connect the transformer's "24VAC" wire to the red wire that leads to the thermostat. In most cases these wires connect together with a wire nut. This wire often uses blue insulation. Some furnaces contain an optional fire protection device between the transformer and the thermostat. In this case the transformer's "24VAC" wire connects to one of the wires that lead to the fire protection device. The other wire from the fire protection device connects to the red wire that leads to the thermostat.