This paper presents a novel sinusoidal pulsewidth modulation control method with voltage balancing capability for the diode-clamped five-level rectifier/inverter system. A complete analysis of the voltage balance theory is given. The voltage balancing effects of the third harmonic offset injection to all three-phase voltages are discussed. The proposed control utilizes the offset voltage to regulate the average currents flowing into and out of the inner junction without affecting output line-to-line voltage. The voltage balancing was achieved by selecting proper offset voltages for both sides. A five-level experimental system is built up and used to prove the theory.