The invention discloses a performance on-line monitoring device for a power distribution switch cabinet lightning arrester and a monitoring method thereof. The monitoring device comprises a microprocessor circuit, temperature signal conditioning circuits, current signal conditioning circuits, an in-cabinet temperature signal conditioning circuit, a display circuit, a keyboard circuit, a power supply circuit, a communication interface circuit in bidirectional communication connection with the microprocessor circuit, temperature sensors, current sensors and an in-cabinet temperature sensor; the temperature signal conditioning circuits, the current signal conditioning circuits, the in-cabinet temperature signal conditioning circuit, the display circuit, the keyboard circuit and the power supply circuit are in one-way communication connection with the microprocessor circuit; the temperature sensors and the current sensors are arranged on a lightning arrester in a power distribution switch cabinet, and the in-cabinet temperature sensor is arranged in the power distribution switch cabinet; and the microprocessor circuit performs on-line monitoring and a performance judgment of the lightning arrester according to acquired monitoring data. Accurate, timely and efficient on-line monitoring of performance of the lightning arrester of the power distribution switch cabinet is achieved, and, through utilization of a total leakage current of the lightning arrester and a combination with temperature data of a body of the lightning arrester, whether a fault occurs in the lightning arrester is comprehensively determined, so safe operation of switch equipment is ensured.