The invention is directed to a multi-bit digital signal isolation system including a plurality of micro-transformers, each having a primary winding and a secondary winding, a transmitter circuit receiving a multi-bit signal and transmitting an encoded logic signal across the plurality of micro-transformers corresponding to the multi-bit signal, the primary winding of each micro-transformer receiving a signal corresponding to one of at least three possible states, and a receiver circuit receiving the encoded logic signal from the secondary windings of the plurality of transformers, decoding the encoded logic signal and reconstructing the received multi-bit signal based upon the decoded signal.