The power electronic transformer (PET) has recently emerged as a type of power converter. It features the basic functions of power conversion and isolation as well as additional functions related to power quality control. A novel PET for a distribution grid called a flexible power distribution unit is proposed in this paper, and the energy exchange mechanism between the network and the load is revealed. A 30 kW 600 VAC/220 VAC/110 VDC medium-frequency isolated prototype is developed and demonstrated. This paper also presents key control strategies of the PET for electrical distribution grid applications, especially under grid voltage disturbance conditions. Moreover, stability issues related to the grid-connected three-phase PET are discussed and verified with an impedance-based analysis. The PET prototype is tested, and it passes the voltage-disturbance ride-through function. The experimental results verify the power quality control abilities of the PET.