During recent decades, grid-connected photovoltaic (PV) system has been widely investigated. Due to intermittent PV generation, battery energy storage system (BESS) is commonly coordinated with grid-tied PV plant to improve grid-integration performance. Traditionally, the grid-tied PV system integrated with BESS is based on two-level inverters and low interface voltage, which requires bulky line-frequency transformers and passive filters for medium-voltage grid integration. To reduce volume and weight, in this paper, a modular transformerless hybrid PV-BESS conversion system based on modular multilevel converter (MMC) is proposed for medium-voltage grid integration, which integrates distributed PV and battery modules into submodules (SMs). The proposed MMC-based PV-BESS system is designed for a 4.16 kV/1 MVA medium-voltage grid based on various semiconductor devices and passive components. Its functionality, efficiency, and volume of the proposed PV-BESS system are evaluated and compared with the traditional two-level PV-BESS system. The study results show that the proposed solution can significantly reduce overall system volume while keeping high efficiency and providing ac and dc grid interconnection.