Multilevel inverters typically require a large number of power switches, increasing the likelihood of faults and compromising system reliability. To enhance inverter reliability, this article introduces a five-level multilevel inverter with fault-tolerant capabilities. This topology employs two DC voltage sources with four unidirectional and two bidirectional power IGBT switches. A fault-tolerant control strategy has been developed to reconfigure the topology whenever an open circuit fault occurs in a switch. To evaluate the proposed topology, a loss analysis and efficiency assessment were conducted using Piecewise Linear Electrical Circuit Simulation. The results showed 36.35 W of power loss and an efficiency of 96.49% for 1 kW of output power. The total standing voltage per unit and cost function of the proposed topology are 6 and 4.2, respectively, which are minimal compared to other fault-tolerant topologies. Furthermore, a laboratory prototype was developed using a DSPACE-1202 controller to validate the results. The voltage stress on the power devices was found to be reduced by 25–50% under various post-fault conditions compared to healthy condition. The proposed topology is able to withstand OC fault in single unidirectional switch or multiple unidirectional switches and still be able to generate 64% of the rated output rms voltage. If an OC fault occurs in any of the bidirectional switches, then the topology is fully tolerant by generating 100% of the rated output rms voltage. The reliability for the proposed topology is performed using Markov chain rule and proved that the proposed topology is superior to other topologies.