AbstractUnbalanced voltages are becoming increasingly common in distribution networks due to the growing integrations of distributed renewable energy resources as well as large loads such as electric vehicle chargers. Such unbalanced voltages introduce significant control challenges as they produce ripples in the controlling signals, impacting the operation of inverters during the unbalanced conditions. Therefore, this paper proposes a controlling algorithm for three‐level inverters aimed at suppressing these ripples on controlling signals; improving the overall performance of inverters, and consequently enhancing the fault ride‐through capability under unbalanced conditions and faults. The proposed controlling algorithm enables inverters to operate in either a balanced current output mode or a suppressed‐ripple active power output mode, depending on the specific event scenario and demands from the grid operators. Current harmonics are suppressed even under severe faults. For improving the voltage balance on the DC capacitors in three‐level inverters, an enhanced method of neutral point current prediction is presented. The proposed method ensures higher balancing accuracy through the use of weighted switching costs, avoiding the requirement of a balancing controller or current extrapolation. Simulation and experimental results demonstrate the effectiveness of the proposed controller for reliable grid operation.