An experimental device was developed for analysis of hydraulic oil characteristics with dielectric constant sensors. Online analysis is the most effective method of the three methods used for analyzing lubricant oils. This is because it can monitor the machine condition effectively using oil sensors in real time without requiring excellent analysis skill and eliminates human errors. Determining the oil quality usually requires complex laboratory equipment for measuring factors such as density, viscosity, base number, acid number, water content, additive, and wear debris. However, the electric constant is another indicator of oil quality that can be measured on-site. The electric constant is the ratio of the capacitance of a capacitor using that material as a dielectric, compared with a similar capacitor that has a vacuum as its dielectric. The electric constant affects the factors such as the base oil, additive, temperature, electric field frequency, water content, and contaminants. In this study, the tendency of the electric constant is investigated with a variation of temperature, water content, and dust weight. The experimental device can control working temperature and mix the contaminants with oil. A machine condition monitoring program developed to analyze hydraulic oil is described. This program provides graph and digital values with variation of time. Moreover, it includes an alarm system for when the oil condition is bad.