This paper presents a compensating system for the harmonic currents, the reactive power and source neutral conductor current in three-phase four-wire distribution system by using seven-level cascaded H-bridge voltage source inverter (CHB-VSI) based shunt active power filter (SAPF). The distribution network which supplies mixed non-linear loads and employing multilevel inverter (MLI) based SAPF is simulated by MATLAB/SIMULINK software. The analysis on performance of SAPF using the proposed control technique based on p-q theory is carried out on the total harmonic distortion of source current, power factor and reactive power. Besides, it is illustrated by extensive simulation results, the effectiveness of CHB-VSI based SAPF on source neutral conductor current. © 2011 IEEE.