This paper describes a maximum power point tracking algorithm for a single-phase, grid-connected photovoltaic system with a transformerless, diode-clamped inverter. The algorithm is based on the fact that in single-phase systems the instantaneous power oscillates at twice the line frequency. The oscillation of the AC power also causes a ripple of twice the line frequency on the DC voltage and DC power of the photovoltaic array. The described algorithm requires the analysis of the phase relationship between the DC voltage and DC power ripple to determine the maximum power point. To establish a steady state balanced system a secondary DC-voltage controller is applied. Simulation results are presented and compared with the perturb and observe method and show the superiority of the proposed algorithm.