This article presents an improved virtual space vector modulation scheme for the reduced switch count three-level inverter with balanced and unbalanced neutral-point voltage (NPV) conditions. By analyzing the effects of unbalanced NPV conditions on basic voltage vectors, the new virtual vectors are constructed by considering the dc unbalancing coefficient and distribution factor for small vectors simultaneously. To facilitate the calculation of duty cycles, the nonorthogonal coordinate system is employed. In addition, an optimized control scheme is developed to obtain the optimized distribution factor, and the relative durations of P-type and N-type small vectors are adjusted to control the voltages across two dc-link capacitors separately. The satisfactory quality of output currents is maintained with both balanced and unbalanced NPV conditions. The feasibility of the proposed scheme is verified by simulated and experimental results.