English: Diagram showing how a laminated core in a transformer prevents power losses due to eddy currents. The drawing at left shows a solid iron transformer core. The alternating current in the transformer's winding (not shown) creates an alternating magnetic field (B, green arrows) within the transformer's steel core. Since the core is electrically conductive, the field induces circulating loops of electric current in the core (I, red lines) called eddy currents due to Faraday's law of induction, which flow in planes perpendicular to the field. The current flowing through the resistance of the core dissipates energy as heat, causing power losses. To reduce the power losses, instead of a solid core (left) many transformers use a laminated core (right). The core is made of a stack of thin steel laminations, with a nonconductive coating (C) on the surface. The eddy currents can't cross from one lamination to the next, so the only eddy currents that can flow must flow within the thickness of each individual lamination. Since the magnitude of the current is proportional to the area enclosed by the loop, this reduces the eddy currents greatly and thus the energy lost in the core.

In the diagram, the magnetic field B is shown in one direction; it actually reverses direction with each half-cycle of the alternating current. The eddy current is shown in the direction it flows during the first quarter of each cycle, when the current is increasing. In the second quarter of each half cycle, the eddy current reverses.