To solve the power quality problems in a high-speed railway tractive power supply system such as negative-sequence current and harmonic current, a multilevel railway power conditioner (MRPC) system based on YNvd balanced transformer is proposed, which adopts a novel MRPC consisting of four multilevel cascaded H-bridge links and the corresponding output filter inductors. Different from the conventional method, this system integrates one side of the MRPC directly into the B-phase flexible taps on the secondary side of the YNvd balanced transformer instead of into the feeder via a step-down transformer, thus reducing the system cost. The topological structure, equivalent model, and compensation principle of this system are analyzed. Furthermore, a hierarchical control strategy, which is composed of command current tracking, circulating current restraining and link voltage balance, is proposed. Finally, simulation results verify the feasibility and effectiveness of the proposed theory.