The modular multilevel DC transformer (MMDCT) exhibits underdamped characteristics because of the primary side series-connected submodule capacitors, arm inductors and parasitic resistors. This often leads to frequent and persistent underdamped oscillations in actual operation, posing challenges to the safe and reliable operation of the system. To address this issue, an equivalent circulating current model of the primary side of the MMDCT is first established, revealing the mechanism behind the occurrence of underdamped oscillations. Second, a small correction angle is introduced to adjust the circulating current suppression voltage every half switching cycle, which actively controls the circulating current’s variation trend and effectively enhances the internal damping of the system, thus suppressing the underdamped oscillations in the transient process. A power feedforward-capacitor voltage and circulating current dual-loop control strategy is adopted. With proper parameter design, the system ensures good dynamic response performance in various scenarios and operating conditions. Finally, the effectiveness of the proposed control strategy in mitigating the underdamped characteristics of the MMDCT is verified through simulations and experiments.