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Transient arc ablation caused by load current during switching is the primary cause of internal contact damage in the on-load tap changers (OLTCs). However, the mechanism of arc ablation on contact in an oil gap, a basis for effective failure assessment, is rarely involved by far. Herein, the arc ablation mechanism was experimentally investigated based on breakdown performance, transient pulse current, and changes to microscopic surface morphology. Silver cathode caused an apparent reduction in the average breakdown voltage, whose data reliability was verified by the Weibull distribution compared to the copper cathode. With the increased applied voltage, the discharge duration decreases, while the discharge pulse’s steepness increases significantly. The materials’ properties of the cathode, including electrical conductivity, melting point, and stability of metal oxides, have a critical impact on arc ablation. As a result, the comparison of the surface morphology in the scanning electron microscopy (SEM) image of the two cathodes shows that the silver electrode has better surface discharge uniformity and remains relatively smooth after arc ablation, whereas the copper oxides produced by arc ablation are relatively stable and irregularly attached to the electrode surface, forming pits and bumps. The transfer process materials during the arc process are also discussed, leading to variations in the quality of contact materials and metal contamination of insulating oil. The results in this article contribute to a better understanding of the damage mechanism of arc ablation on contact and its influencing factors.