This paper proposes a modulation technique for fault-tolerant cascaded H-bridge multilevel inverters. The proposed modulation scheme comprises two types of PWM strategy to cover both open- and short-device fault cases. The neutral shift is applied as fault-tolerant control with the proposed modulation scheme. Finally, three-phase balanced line-to-line voltages and line currents are produced under the internal faulty condition. In addition, a novel switching rotation scheme is proposed to improve power distribution among the H-bridge inverter cells under the faulty conditions. Simulation and experimental results are included to show the feasibility on the proposed fault-tolerant methods in the field.