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This paper proposes the topology of diode rectifier plus multilevel current source inverter for synchronous generator based direct-drive megawatt wind energy conversion systems. On the generator side, the diode rectifier is employed for cost reduction. Assuming the grid-side converter is a pulse-width modulated (PWM) current source inverter (CSI), analyses on feasibility of using the diode rectifier and its impact on system control, operating range and rating design are presented. It is then revealed that under limited device switching frequency, using a multilevel configuration to replace the single PWM-CSI on the grid side effectively increases the equivalent inverter frequency, lowers the requirement on filter capacitance, extends the whole operating range and therefore brings benefits to many aspects of the system. For operation of the multilevel CSI, a five level space vector modulation scheme offering superior harmonic profile and minimum switching frequency is designed. The dc current balancing between paralleled inverter bridges is realized by proper selection of redundant switching states. Simulation results obtained from a 2MW Matlab/Simulink model are provided to verify the proposed concepts.