A direct power converter based variable frequency drive with three-level input/output waveforms is presented. The proposed drive generates common-mode free output voltages while drawing sinusoidal input currents. Like the conventional matrix converter, the input and output quantities are controlled simultaneously with one controller. Unlike the conventional matrix converter, the circuit always provides a freewheeling path for the load and source currents, thus eliminating the clamp circuit. Further, zero voltage switching (ZVS) of the front-end is naturally achieved. Functional operation of the converter is demonstrated using a hardware prototype. The drive is evaluated for the output common-mode voltage as well as its performance to load and source transients. Extension of the presented drive to an open-end winding drive with enhanced voltage gain is also discussed in context of previous research.