Transformerless photovoltaic (PV) systems are used because they have many advantages (weight, size, efficiency, etc.). However, transformerless PV systems suffer from leakage current. The present paper proposes a modulation technique to reduce leakage current in transformerless PV systems using a three-level inverter. The cause of the leakage current is analyzed. The proposed technique uses large vectors, medium vectors and only one zero vector, and switching occurs once in a switching period. The effectiveness of the proposed technique is verified by comparing its results with those of the space vector pulse width modulation (SVM) method. The results are obtained through simulation and experiment.