ABSTRACTNonisolated three‐level inverter has the problem of leakage current and neutral‐point (NP) potential imbalance in photovoltaic grid‐connected system. Therefore, a new subregional vector‐optimized modulation strategy is proposed, which can be adopted to achieve leakage current suppression and NP potential balance control in full power factor and the range of full modulation ratio. First, a system model is established for the three‐level grid‐connected inverter to analyze the mechanism of leakage current and the factors affecting the NP potential. Aiming at the shortcomings of existing modulation strategies, the three‐level space vector modulation region is redivided, and different voltage vector preselection methods are used in different modulation regions, reduced computing power. In addition, controlling the balance of NP potential, the effect of dead zone effect on the leakage current is further analyzed and improved on the basis of the proposed strategy. Finally, the proposed strategy is compared with the traditional space vector pulse width modulation strategy. The experimental results show that the proposed control strategy suppresses the leakage current below 300 mA and can effectively control the NP potential shift and eliminate the midpoint potential fluctuation. Meanwhile, the control strategy is low in computation and fast in seeking the optimum.