Multilevel inheritance occurs when a class inherits from another class that inherits from another base class. The child class inherits properties from its parent class, which inherits properties from its own parent class or grandparent of the child class. The syntax allows a class to inherit from another derived class, extending the inheritance to multiple levels. An example in C++ demonstrates a class D1 inheriting from class B2, which inherits from class B1, to showcase multilevel inheritance.