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Transformerless inverters are getting popular in distributed photovoltaic power generation (PVPG) system due to its light weight, low cost, and higher efficiency in power conversion. However, the production of leakage current leads to severe electromagnetic interference and operational insecurity, which declines the reliability and efficiency of the overall system. Besides that many of the topologies have been addressed with real power injection capabilities in the literature. Therefore, in this paper, an improved hybrid-bridge (IH-B) inverter for transformerless PVPG system is proposed with 1) reduced leakage current by abolishing the fluctuations in common-mode voltage (CMV) due to switch junction capacitances and 2) reactive power capability with a modified sinusoidal pulsewidth modulation technique. This topology is constructed with the combination of bidirectional clamping branch and hybrid-bridge (H-B) inverter topology to maintain CMV at half of the dc-link voltage and ensure better quality of output waveforms at different power factors of the grid. Further, MATLAB simulation results of the IH-B and H-B topologies are presented and compared to prove the potential benefits of the proposed topology. Finally, a 500W prototype model is built and tested to validate the effectiveness of the IH-B topology in reduction of leakage current and reactive power capability. [ABSTRACT FROM AUTHOR]