Medium voltage direct current (MVDC) power system has the ability of servicing highly dynamic loads at reduced size and weight in ship. An isolated bidirectional DC-DC converter plays a crucial role in MVDC distribution system in ship, which connects medium voltage bus and low voltage bus with galvanic isolation. An isolated bidirectional modular multilevel DC-DC converter (M2DC) for MVDC distribution system in ship is proposed in this paper. The two-level modulation method is used in the isolated structure to achieve that the equivalent operation frequency is integer multiple of the real switching frequency. The higher equivalent operation frequency decreases size and weight of transformer and filters. Power flow model and phase-shift control strategy of the isolated bidirectional M2DC are analyzed. The energy balancing mechanism between upper arm and lower arm is explained. The M2DC topology and design theories proposed in this paper are verified by simulation results.