DC fault protection is one challenge impeding the development of multiterminal dc grids. The absence of manufacturing and operational standards has led to many point-to-point HVDC links built at different voltage levels, which creates another challenge. Therefore, the issues of voltage matching and dc fault isolation are undergoing extensive research and are addressed in this paper. A quasi two-level operating mode of the modular multilevel converter is proposed, where the converter generates a square wave with controllable dv/dt by employing the cell voltages to create transient intermediate voltage levels. Cell capacitance requirements diminish and the footprint of the converter is reduced. The common-mode dc component in the arm currents is not present in the proposed operating mode. The converter is proposed as the core of a dc to dc transformer, where two converters operating in the proposed mode are coupled by an ac transformer for voltage matching and galvanic isolation. The proposed dc transformer is shown to be suitable for high-voltage high-power applications due to the low-switching frequency, high efficiency, modularity, and reliability. The dc transformer facilitates dc voltage regulation and near instant isolation of dc faults within its protection zone. Analysis and simulations confirm these capabilities in a system-oriented approach. © 1986-2012 IEEE.