Leakage inductance derives from the electrical property of an imperfectly-coupled transformer whereby each winding behaves as a self-inductance in series with the winding's respective ohmic resistance constant. These four winding constants also interact with the transformer's mutual inductance. The winding leakage inductance is due to leakage flux not linking with all turns of each imperfectly-coupled winding.

Leakage reactance is usually the most important element of a power system transformer due to power factor, voltage drop, reactive power consumption and fault current considerations.

Leakage inductance depends on the geometry of the core and the windings. Voltage drop across the leakage reactance results in often undesirable supply regulation with varying transformer load. But it can also be useful for harmonic isolation (attenuating higher frequencies) of some loads.

Leakage inductance applies to any imperfectly-coupled magnetic circuit device including motors.