This paper presents an improved two-level voltage source converter for dc transmission systems with relatively low rated power and dc operating voltage. Unlike conventional two-level converter, the presented converter employs two distributed cell capacitors per three phase; thus, do not contribute any current when converter is blocked during dc short-circuit fault as in modular multilevel converter case. The use of three-phase cells is proven to be beneficial because the arm currents do not contain second-order harmonic currents, and cell capacitors tend to be small as they only experience high-order harmonic current associated with the switching frequency. For the same rated dc-link voltage and switching devices, the rated power of the improved two-level converter will be twice than that of the conventional two-level converter. Averaged, switching function, and electromagnetic transient simulation models of the improved two-level converter are discussed and validated against detailed switch model. The viability of the improved two-level converter for high-voltage dc applications is examined, considering dc and ac short-circuit faults. Besides, reduced complexity of the control and power circuit of the improved two-level converter, it has been found that its transient responses to ac and dc faults are similar to that of the modular multilevel converter.