Transformerless PV inverters are most preferred for grid-connected photovoltaic (PV) generation systems due to their higher efficiency and lower cost. However, to meet the safety regulations, the leakage current, which deteriorates the power quality and generates EMI of transformerless PV inverters, has to be addressed carefully. In order to eliminate the leakage current, an improved H5-based topology is proposed. The operation principle, common mode (CM) characteristics, and the impact of junction capacitance of the switches are analysed in detail. Three-level output voltage has been achieved in the proposed improved inverter by implementing unipolar SPWM (sinusoidal pulse-width modulation) with a wide input voltage range. Furthermore, the European Union (EU) efficiency is improved by replacing the IGBTs with MOSFETs. The proposed improved inverter topology has been simulated by MATLAB/Simulink software to validate the accuracy of the theoretical explanations. Finally, a 1-kW prototype has been built and tested. Experimental results show 98.2% maximum efficiency and 97.76% EU efficiency on the 1-kW prototype circuit with 16 kHz switching frequency.