Due to the attractive advantages such as modularity, scalability and excellent power quality of modular multilevel converter (MMC), converters based on MMC could be a promising alternative solution for traction transformer. A novel MMC-based advanced co-phase traction power supply system is proposed in this paper to solve power quality issues and eliminate the neutral sections in the traditional traction power supply system. And in the proposed system, a DC power transmission system is designed, which provides convenient access for distributed energies benefiting the utilization of the natural resources such as solar energy and wind energy along railways. In order to ensure the normal operation of the proposed system, nearest-level modulation considering voltage balancing is designed for MMCs. The mathematic model three-phase MMC-based rectifier is derived in detail. Based on the mathematic model, dual current-loop control is designed for the rectifier. Besides, the parallel operating traction substations suffer circulating current issue. A droop control combining with double closed-loop control is designed to deal with the problem. The correctness and feasibility of the system and its modulation and control strategies is verified through simulation and a small-scale experiment. INDEX TERMS Electrified railway, traction power supply system, modular multilevel converter (MMC), three-phase rectifier, single-phase inverter.