To analyze the harmonic characteristics and interaction mechanism of modular multilevel converter based multi-terminal HVDC system (MMC-MTDC), firstly, the concept of average switching function is introduced, and the detailed time domain model of MMC is established. The simplified model of MMC is obtained by neglecting the internal dynamics, thus the equivalent circuit of MMC-MTDC is obtained, and the transfer function of DC side harmonic current to DC side harmonic voltage on each converter is deduced. Secondly, by defining the dynamic phasors of each order of AC side current and DC side voltage as state variables, the time domain model of MMC is transformed into harmonic analysis model with dynamic phasor sequence components, which is used to analyze and obtain the harmonic distribution characteristics and harmonic transmission mechanism at AC/DC side of MMC. By describing the frequency characteristics of the transfer function of DC side harmonic current to DC side harmonic voltage on each converters, the resonant characteristics of MMC-MTDC and the interaction mechanism of harmonics between different converters are analyzed. Finally, the correctness of the analysis of harmonic characteristics and interaction mechanism are verified by simulation on MATLAB/Simulink. The analysis results can provide theoretical support for proposing harmonic suppression strategy.