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In this study, a two-level polytomous multilevel measurement (PMMMT-2) model was specified to assess differential functioning on polytomous testlet items using Bayesian Markov chain Monte Carlo (MCMC) approach. The PMMMT-2 model’s assessment of differential functioning was compared with that of IRT-Based DIF detection model for investigating different sources of differential functioning at step and testlet level. Simulation results supported the PMMMT-2 model is a useful and effective tool to assess differential functioning on testlet-based polytomous items. This research finding has important implications for psychometric research and practice.