Active (Power) Filters has become one of the promising devices in distribution flexible AC transmission system (DFACTS) technology in past few years. It has the ability to dynamically compensate harmonic currents and reactive power simultaneously. That’s why Active Filter becomes more competitive than Static Var Compensator (SVC) in shunt connected compensation, in which SVC can only compensate the reactive power. Due to the development of Active Filter has dramatically increased, Active Filter has been applied into varied applications with varied power rating or capacity, ranged from several kilo VA to hundred Mega VA. Two-level three-phase voltage source inverter (VSI) is widely used in low voltage applications while multilevel three-phase VSI is more suitable in medium and large capacity power quality compensator. As high voltage and current stresses have been the main problems of Active Filter in high power applications which cause higher system losses and lower efficiency, multilevel topology had been proposed in order to release the voltage stress of the switching devices by connecting them in series. Among different multilevel VSI topologies, three-level VSI is the most promising one. The three-level structure not only reduces voltage stress across the switches but also provides more available vectors which can improve harmonic contents of the VSI by selecting appropriate switching vectors. The decreasing voltage stress leads to corresponding decrease of dv/dt, which can reduce the electromagnetic interference (EMI). The three-level neutral-point-clamped (NPC) inverter, widely used in applications for a three-phase three-wire system, originally has the structure of split dc capacitors. So the existing dc neutral point can be directly utilized as the ground return. Actually, the three-level NPC inverter can be used in applications for a three-phase three-wire system and for a three-phase four-wire system as well. Pervious study shows that three-level NPC inverter is cheaper and easier to control than a three-level four-leg NPC inverter. Therefore, a three-level NPC inverter is chosen as a shunt power quality compensator for a three-phase four-wire system in this thesis. As the output level of the Active Filter increases, the number of switching devices and the dc capacitors increases. DC bus voltage unbalance has been one of the major problems of multilevel inverters. The unbalanced dc voltages of a three-level inverter could lead to a sifted voltage at virtual ground. Traditional three-level four-leg NPC inverter can solve this problem but it will degrade the compensating performance. Different control strategies and circuit structures have been proposed in solving this problem. Among them, the generalized multilevel inverter solved the problem by giving the inverter a voltage self-balancing ability. The generalized multilevel inverter is constructed by two or more basic cells which also provide a higher extensibility for the inverters. Besides the dc bus voltage balancing problem, the increment of switching losses of the inverter has taken into consideration in this thesis. System instability, switching frequency limitation and EMI are some of the problems which directly relate to the switching losses of the inverters. Therefore soft switching techniques have been proposed to tackle these problems in order to improve the efficiency and the performance of the inverters. Resonant dc-link or quasi-resonant dc-link (QRDCL), resonant commutated pole, zero switching transition are the commonly used soft switching techniques, which have different characteristic in terms of switching ability. QRDCL technique is employed in this thesis since it has a simpler control system and lesser auxiliary components. Zero voltage condition is generated by QRDCL inverter while the dc bus voltage decreases to zero. Severe dv/dt of the power devices is relaxed and the overall switching losses are reduced under zero voltage switching (ZVS). This thesis proposes a combination of the self-balancing and the soft switching techniques in three-level active power filter application. Operating principles of both QRDCL and generalized three-level are given, and the effects of their interaction are analyzed. A control strategy of a QRDCL generalized three-level active power filter is also proposed. Simulation results and experimental results are given and verify that the proposed system can achieve dc-link balance and switching losses reduction simultaneously. The compensation performance of the proposed active power filter remains the same as the performance of a traditional three-level active power filter, which indicates the newly added functions won’t affect the original operation of the three-level active power filter.