A fault tolerant three phase five-level inverter configuration for the application of islanded photovoltaic (PV) systems is proposed. The fault tolerant five-level inverter configuration is achieved by stacking a two-level inverter, a three-level neutral point clamped inverter along with three bidirectional switches. This configuration is fed with two DC sources. The proposed configuration shows fault tolerant behavior towards switch open circuit fault in one or more inverter legs. In case of source failure it is able to utilize the healthier source for supplying uninterrupted power to essential loads. During fault the proposed fault tolerant inverter operates as three-level inverter with half of the rated power. The configuration also has the provision of energy balancing among two sources during partial shading or malfunctioning of PV system. The operation of the proposed inverter during different failure modes and energy balancing among two sources are discussed and verified using MATLAB/SIMULINK. © 2016 IEEE.