A photovoltaic (PV) transformer‐less grid‐connected cascaded diode‐clamped half‐bridge multilevel inverter (MLI) is presented in this paper. Compared with the conventional cascaded H‐bridge (CHB) multilevel inverter, the projected inverter permits connection of double the DC‐link voltage and hence enhances its rating. The most common problem the PV‐based transformer‐less grid‐connected CHB MLI system faces is the flow of leakage currents created by parasitic capacitances due to the disparity in common‐mode voltage. As per the German standards VDE‐V‐0126‐1‐1, the leakage current must be less than 30 mA. In the proposed inverter, due to the high‐frequency pulse width modulation of voltage, a peak leakage current flow of nearly 300 mA at switching frequency (2500 Hz) and about 150 mA at its subsequent harmonics is observed. Therefore, LC‐filters are employed in the proposed inverter to suppress the peak leakage currents to less than 3 mA. Also, the LC‐filters improve the total harmonic distortion (THD) profile of the injected grid current. Further, the proposed inverter is also designed to address the temporary faults. The proposed transformer‐less inverter is simulated using the MatLab/Simulink platform, and the results are experimentally validated by performing on a real‐time hardware‐in‐the‐loop using OPAL‐RT OP5700 digital simulator as plant and dSPACE 1202 as controller.