Protective relays are important parts of the power system. The protection guards valuable equipment, and protective relays play a vital role in performing the task. The relay detects fault conditions within an assigned area, opens and closes output contacts to cause the operation of other devices under its control. The relay acts to operate the appropriate circuit breakers to prevent damage to personnel and property. To ensure consistent reliability and proper operation, protective relay equipment must be evaluated and tested. The importance of the relay evaluation issue is linked to capability to test the relays and relaying systems using very accurate waveform representation of a fault event. The purpose of testing protective relays is to ensure correct operation of the relay for all possible power system conditions and disturbances. To fulfill this purpose, relay testing in varying network configurations and with different fault types is required. There are a variety of options that have different performance potentials and implementation constraints. Use of digital simulators to test protective relays has proven to be an invaluable mean to evaluate relay performance under realistic conditions. This thesis describes a new methodology that attempts to improve the existing practices in testing relays by using advanced digital simulator hardware, different software packages for network modeling, and new software tools for generating and replaying test waveforms. Various types of microprocessor relays are tested and evaluated through the set of scenarios. New methodology that combines different software packages to facilitate particular testing objectives is applied.