Circulating current is caused by the mismatch between bridge arm voltage and output voltage in modular multilevel converter with integrated battery energy storage system (MMC-BESS). To solve this problem, a circulating current suppressing strategy based on virtual impedance and passive backstepping control (VI-PBSC) is proposed. Firstly, the passive control based on Euler Lagrange (E-L) model is used to adjust the energy function, accelerate the dissipation and modify the system control parameters to ensure the global stability of the system. Then, the back-stepping control is used to realize the fast tracking of the actual value to the reference value and the fast response of the circulation frequency doubling component control is realized while maintaining the global stability. Moreover, virtual impedance is used to suppress the high-order harmonic component in the bridge arm and suppress the double frequency circulating current to reduce the system loss; Finally, in the state of power fluctuation and load mutation, five different control models are established and compared by simulation. The results show the effectiveness and superiority of the proposed control strategy.