A novel two-mode inverter based open-winding permanent magnet synchronous motor (OW-PMSM) drive is proposed in this article. The proposed drive operates in hybrid-inverter mode at low and medium speed to achieve high power quality. The common-DC-bus mode is adopted at high speed to fulfill a wider speed range than hybrid-inverter mode. Based on the proposed drive, a modulation strategy for any voltage ratio is proposed, which integrates the instantaneous floating capacitor (FC) voltage into modulation to synthesize the reference voltage vector. The proposed modulation strategy can not only guarantee the FC voltage regulation but also start the drive when the FC voltage is zero and switch the mode of the drive smoothly. Besides, the excellent fault-tolerant capability of the proposed drive is studied under open-phase and switch faults. In the proposed fault-tolerant control, a sinusoidal zero-sequence current is injected to tolerate the open-phase fault in the common-DC-bus mode and redundant switching combinations are used to tolerate switch faults in the hybrid-inverter mode. All the claimed advantages have been validated by experimental results.