This paper presents an original Switched Observer (SO) for reduced-sensor control of a grid-connected Packed U Cells (PUC) multilevel inverter. The proposed SO performance is evaluated using a single-phase 7-level PUC inverter connected to the grid through filtering inductor. Based on the actual grid current, the proposed SO estimates accurately the PUC capacitor voltage, which is fed to the Model Predictive Control (MPC) algorithm while making use of a hybrid model considering both discrete and continuous variables. For real-time application, necessary conditions are given to guarantee the practical stability of the proposed SO under system parameters and input voltage variations according to the selected switching pattern. Theoretical analysis and simulation investigations are conducted to prove that the proposed SO-MPC scheme is stable in closed-loop for all system configurations and has good performances even during various disturbances (load change, parameters mismatch, and input voltage variation).