Rail power conditioner (RPC) has the ability to improve the power quality in AC railway power grids. This power conditioner can increase the loading capacity of traction substations, balance the active power between the feeder load sections, and compensate for reactive power and current harmonics. At present, there is increasing use of multilevel converter topologies, which provide scalability and robust performance under different conditions. In this framework, modular multilevel converter (MMC) is emerging as a prominent solution for medium-voltage applications. Serving that purpose, this paper focuses on the implementation, testing, and validation of a reduced-scale laboratory prototype of a proposed RPC based on an MMC. The developed laboratory prototype, designed to be compact, reliable, and adaptable to multipurpose applications, is presented, highlighting the main control and power circuit boards of the MMC. In addition, MMC parameter design of the filter inductor and submodule capacitor is also explained. Experimental analysis and validation of a reduced-scale prototype RPC based on MMC topology, are provided to verify the power quality improvement in electrified railway power grids. Thus, two experimental case studies are presented: (1) when both of the load sections are unequally loaded; (2) when only one load section is loaded. Experimental results confirm the RPC based on MMC is effective in reducing the harmonic contents, solving the problem of three-phase current imbalance and compensating reactive power.