The capacitor is one of the most important components in a modular multilevel converter (MMC). Due to the chemical process and the aging effect, the capacitor is subject to deterioration over time which is usually manifested by a drop in capacitance. To identify the abnormal capacitors and enhance the reliability of MMCs, an improved submodule (SM) capacitor condition monitoring method is proposed in this paper. The proposed method estimates the capacitance during each control cycle based on the switching states of SMs, offering advantages such as high accuracy and no adverse influence on the operation of MMCs. Firstly, the aging differences of capacitors in different SMs per arm of MMC are analyzed. Then, the capacitances of SMs that switch on the state are calculated based on the relationship between the capacitor voltage and current during each control cycle. A data processing algorithm is proposed to improve the accuracy of capacitance estimation. Finally, the simulation and the real-time control hardware-in-the loop test results based on real-time digital simulator (RTDS) show the effectiveness of the proposed method.