For modular multilevel converter (MMC) under Nearest Level Control (NLC) with dozens of or less sub-modules (SMs), circulating current suppression control (CCSC) can lead to severe fluctuation in dc current of MMC due to insufficient voltage levels to modulate the control voltages generated from circulating current suppression. This article presents a detailed analysis of the mechanisms of the above-mentioned problems, and a solution by using a dual-mode modulation method combining pulsewidth modulation (PWM) and NLC modulation is presented. In this method, two SMs in each arm are selected to operate under PWM modes to precisely modulate the control voltages from circulating current suppression, and the rest of SMs are operated under NLC modes to roughly modulate the output ac voltage of MMC. A voltage balancing control method for both of the two different modulated SMs is also investigated. The proposed method not only eliminates the dc current fluctuation in MMC, but also achieves voltage balancing among SMs. Finally, validation by RTDS is given to verify the effectiveness of the proposed method.