Abstract: The multi-terminal high voltage direct current（HVDC） and DC grid technologies are the efficient methods to resolve the problems of renewable energy integration, and the DC transformer is the key equipment to interconnect DC sources with different voltage levels and to build DC grids. This paper presented a new direct-coupled DC transformer topology based on cascaded submodules. A step-wave quasi 2-level modulation was introduced to achieve the voltage balance of the submodule capacitors. Additionally, the dv/dt of the DC transformer was also reduced by the modulation. Compared with the prior arts where sine-wave modulation was applied, the proposed DC transformer offers several merits: 1)the switching frequency is reduced because the IGBTs in the DC transformer are switched on and off once in a period; 2)the amplitude of the AC circulating current is lower, so that the conducting and switching losses are both reduced; 3)the requirement of the submodule capacitance is reduced dramatically, thus the cost and the volume of the submodules are reduced. Finally, the simulation of the proposed DC transformer based on Matlab/Simulink platform was given to verify the theoretical analysis.