A conventional matrix converter (CMC) is a direct ac-ac converter without the need for a DC bus. This paper proposes a direct three level matrix converter (DTMC) topology which is advancement to the CMC in terms of considerable reduction in THD and lower switching stresses. As opposed to CMC which allows the output line voltage to be either input line voltage or zero, the DTMC provides an extra level - the input phase voltage, to be available by tapping into input filter neutral. A novel constant pulse width modulation (CPWM) strategy is proposed for the DTMC by decoupling it into a fictitious multi level converter and a conventional inverter. A comparative study between CMC and DTMC has been presented by means of numerical simulation results that have been verified on a laboratory hardware prototype.