Modular multilevel converters (MMCs) have emerged as a promising solution for integrating renewables. In case of photovoltaic (PV) systems, PV arrays can be integrated at the submodule (SM) level, and the distributed maximum power point tracking (DMPPT) can be achieved through AC and DC circulating current control and perturb and observe (P&O) methods. However, this implementation is hindered by the need for numerous measurements, since the voltage and current of all PV arrays in each SM must be known. To address this issue, we propose a three-phase reduced-sensor MMC with distributed MPPT for PV integration based on an extended Kalman filter (EKF). For each MMC arm, the EKF estimates the voltage and irradiance of each SM by exploiting their gate signals and duty cycles as well as the arm current and voltage. This solution is compatible with uniform and non-uniform irradiance conditions both under the steady-state and transient conditions and uses significantly fewer sensors than other strategies employed in similar-purpose MMCs, while achieving comparable efficiency. Moreover, by exploiting the PV array characteristics, it allows performing DMPPT more directly, without using P&O methods. These features are confirmed by simulations of an MMC-based PV system with 12 SMs per arm.