This paper deals with coupling transformer core saturation problem in cascaded multilevel converter (CMC) based transmission-type static synchronous compensator (T-STATCOM) systems. The effects of nonlinear characteristics of the coupling transformer and CMCs on the core saturation phenomenon are investigated, and the associated mechanisms are described. In order to prevent the transformer core from being saturated, dc current components in the coupling transformer secondary lines are eliminated by modulating one or more than one voltage steps of staircase CMC voltage waveforms via the electronic gating circuitry. The proposed dc current elimination method is implemented on a 154-kV, +/- 50-MVAr CMC-based T-STATCOM system, which is operating either in interarea oscillation damping or terminal voltage regulation modes at any time in a 400/154-kV transformer substation since March 2010. The effectiveness of recommended dc current elimination method is verified in the field.