Voltage sag in a power system is an unavoidable power quality issue, and it is also an urgent concern of sensitive industrial users. To ensure the power quality demand and economical operation of the power system, voltage sag management has always drawn great attention from researchers around the world. The latest research that realizes the power quality conditioning has used dynamic voltage restorers (DVRs), static VAR compensator (SVCs), adaptive neuro-fuzzy inference systems (ANFISs), and fuzzy logic controllers based on DVR to mitigate voltage sag. These devices, methods, and control strategies that have been recently used for voltage sag mitigation have some limitations, including high cost, increased complexity, and lower performance. This article proposes a novel, efficient, reliable, and cost-effective voltage sag mitigation scheme based on a modular multilevel converter (MMC) that ensures effective power delivery at nominal power under transient voltage conditions. The proposed method, the MMC, compensates for the energy loss caused by voltage sags using its internal energy storage of the submodules, and ensures reliable power delivery to the load distribution system. Furthermore, control strategies are developed for the MMC to control DC voltage, AC voltage, active power, and circulating current. Detailed system mathematical models of controllers are developed in the dual synchronous reference frame (DSRF). Validation of the results of back-to-back MMC for dynamic load distribution system is analyzed which proves the effectiveness of the proposed scheme for voltage sag mitigation.