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The size of passive components in an adjustable speed drive can be reduced by using small dc-link capacitors. The EMI filter in the drive also consists of passive components. The size of the filter can be reduced by using a three-level inverter, which can have low output voltage distortion. However, the three-level inverter based on small dc-link capacitors requires a PWM strategy to maintain neutral-point voltage balance. In this paper, the common mode voltage, which is the determining factor for the EMI filter size, is analyzed for a virtual-vector-based PWM strategy. The common mode voltage, the shaft voltage, and the conducted emission for the small dc-link capacitor based three-level inverter are compared with that of the two-level inverter operated with space vector PWM strategy. Experimental results for the common mode voltage, the shaft voltage, and the conducted emission are presented. Results show that the conducted emission from the three-level inverter is lower than that of the two-level inverter. Thus, a three-level inverter requires a smaller EMI filter in motor drives with small dc-link capacitors.