This chapter examines the working principles of modular multilevel converter (MMC), including MMC topology, MMC nearest level modulation, MMC average model based on switching functions, analytical model derivation of MMC based on successive approximation method, MMC AC-side fundamental equivalent circuit, relationship between MMC level number and AC-side voltage harmonic characteristics, relationship between MMC voltage modulation index and AC-side harmonic characteristics, relationship between MMC control frequency and AC-side harmonic characteristics, MMC DC-side impedance frequency characteristics, MMC AC-side impedance frequency characteristics, steady-state operating region of MMC connected to active AC systems, and steady-state operating region of MMC supplying power to passive loads.