This paper proposes a source based commutation method for a matrix converter fed power electronic transformer. Two converters produce high frequency voltage across a transformer, with open ended primary. A third matrix converter converts the high frequency chopped voltage to line frequency. The leakage inductance of the transformer creates a commutation delay in the primary side to secondary side voltage transfer. During the commutation interval, difference in the load current and secondary leakage current flows to the clamp circuit. Thus, power is lost in the clamp circuit during every commutation interval. The source based commutation described in this paper minimizes the power loss during commutation interval. No additional switching is needed at the primary side power converters for source based commutation. The proposed method has been simulated in SIMULINK and the results have been presented.