This paper proposes a cascaded multilevel battery energy storage based parallel dynamic voltage compensator (DVC) for medium voltage industrial distribution systems. In this parallel DVC, fast switch is series-connected for voltage sag detection, and cascaded multilevel battery energy storage is parallel-connected for voltage support during the voltage sag period. According to the grid-side voltage sags or not, corresponding circuits and three-layer control strategies are developed. While the feedforward proportional–integral (PI) control method is adopted in the outer layer to track the ideal compensation voltage when the grid-side voltage sags, the ideal compensation current when the grid-side voltage does not sag is obtained through battery charging current as well as reactive power, harmonics, and negative sequence load current components. In order to cope with parameter differences in cascaded multilevel battery energy storage, the middle layer interphase and the inner layer intermodular state of charge (SOC) equalization control are adopted in two scenarios. Furthermore, the parallel DVC is quantitatively compared with series DVC in the aspect of required battery capacity, and their advantages and disadvantages are systematically analyzed. Case studies are performed to verify the effectiveness and superiority of the proposed methodology on voltage support.