Submodule (SM) fault is a common potential problem in the modular multilevel converter (MMC), which may lead to current distortion and even the collapse of the control system. This article proposes a novel operation scheme for SM fault in medium-voltage MMC applications. First, when the fault number is low, the capacitor voltages increase to a lower value according to the operation status. Second, when the fault number is higher, the capacitor voltages increase to the rated value and the zero-sequence voltage (ZSV) is injected to maintain the normal operation of MMC. In addition, a virtual voltage idea is applied to simplify the modulation under SM faults, where the reconfigurations of carriers are not necessary. Compared with the conventional fault-tolerant method, the proposed method can enhance the ride-through capability of MMC and simplify the modulation process under SM faults. Simulation and experimental results verify the effectiveness of the proposed operation scheme under severe SM faults.