This paper presents a new hybrid multilevel inverter topology that offers several advantages such as reduced number of components, optimized costs, encapsulated size and light weight. The proposed compact cascaded inverter consists of six switches and three asymmetrical dc voltage sources that is able generate six positive voltage states, and multiple modules can be cascaded to generate a desired level of voltage. An H-bridge unit is connected between the load and the cascaded modules that helps to produce negative half cycle using the positive voltage states originated by the modules. Although the proposed compact cascaded inverter contains an H-bridge unit, it offers a moderate level of total standing voltage unlike the existing topologies, resulting in a decreased number of equipment and cost. A level shifted multi-carrier based PWM technique is used to drive the switches of the proposed inverter, which provides current with less total harmonic distortion (THD). Finally, the performance of the proposed compact cascaded inverter has been evaluated by the simulation tests carried out in MATLAB/Simulink and results presented.