The insertion of dead time will lead to the distortion of output waveforms, which seriously affects the characteristics of the ac induction motor control system. In order to reduce the output distortion of three-level T-type inverters caused by dead time insertion, an online feedback dead time compensation method is developed. In this method, the compensation time is obtained and further corrected by the online feedback of duty cycle. Meanwhile, current polarity judgment is accurately realized by sampling the neutral point (NP) potential and three-phase output terminal voltage potentials. In addition, in this article, we take the NP potential fluctuation into account to approximate the true situation. The developed method can be applied to both open-loop and closed-loop motor drive systems. To verify the effectiveness of the method, essential simulation and experiments are carried out. Compared with the traditional methods, the developed method can prominently reduce the output waveform distortion. Simulation results emphasize that the proposed scheme can significantly improve the performance of three-level inverters, and the identical conclusion is obtained on 210 V/2.24 kW motor platform.