This paper presents an optimized widthwise electromagnetic shunt as a cost-effective way to reduce the stray losses in transformer tank walls. A 1000 KVA, 10/0.4 kV oil immersed distribution transformer is used. 3-D finite element method (FEM) has been used to analysis and study the impact of proposed magnetic shunt on the reduction of tank losses. In this paper different combinations of optimized magnetic shunt have been studied. The paper compares the performance of proposed optimized magnetic shunt with the available conventional shunts. Considerable reductions in stray losses on the transformer tank wall are obtained by using the combinations of electromagnetic shunt with optimal thickness. Compared with aluminum shields and conventional electromagnetic shunt, the proposed optimized widthwise magnetic shunt reduces stray losses by 13.96%.