Voltage balance control of dc capacitors is the key problem of multilevel diode-clamped converters (DCCs). In this paper, a novel hybrid voltage balance method is proposed for five-level DCCs. First, to balance the upper or lower two capacitors, a novel flying-capacitor-based voltage balance circuit (VBC) is proposed, and the time-domain average model of the VBC is established. Then a state-machine-based control strategy is developed to balance capacitor voltages as well as to limit overcurrent of inductors in a transition process. To keep the midpoint voltage stable, a zero-sequence injection method is proposed, which inherently ensures the improved modulation signals locate within the linear modulation ranges. With the flying capacitor transferring energy between dc capacitors, the device voltage stresses of the VBC are equalized, and the steady-state current ripples of the inductors are much smaller than those of the conventional chopper-based VBCs, which can reduce the volume and weight of the inductor. Simulation and experimental results for both inverter and rectifier operations prove that the proposed hybrid voltage balance method can balance dc capacitors of five-level DCCs in both steady states and transition states, and the inductor currents of VBCs can also be restricted within safe ranges.