This paper presents the small signal modeling using the state space averaging technique and reliability analysis of a three-phase z-source ac-ac converter. By controlling the shoot-through duty ratio, it can operate in buck-boost mode and maintain desired output voltage during voltage sag and surge condition. It has faster dynamic response and higher efficiency as compared to the traditional voltage regulator. Small signal analysis derives different control transfer functions and this leads to design a suitable controller for a closed loop system during supply voltage variation. The closed loop system of the converter with a PID controller eliminates the transients in output voltage and provides steady state regulated output. The proposed model designed in the RT-LAB and executed in a field programming gate array (FPGA)-based real-time digital simulator at a fixedtime step of 10 μs and a constant switching frequency of 10 kHz. The simulator was developed using very high speed integrated circuit hardware description language (VHDL), making it versatile and moveable. Hardware-in-the-loop (HIL) simulation results are presented to justify the MATLAB simulation results during supply voltage variation of the three phase z-source ac-ac converter. The reliability analysis has been applied to the converter to find out the failure rate of its different components.