This paper presents a new configuration of Unified Power Quality Conditioner (UPQC) which is connected to a two feeder distribution system to improve the power quality. The advantage of the proposed design is the flexibility to use it as Interline Unified Power Quality Conditioner (IUPQC) or a combination of shunt/series active power filters. The shunt active power filter is used for mitigation of current harmonics and reactive power compensation, while the series active filter is to maintain the load voltage as sinusoidal at the required level. Simulation of the distribution system model by using PSCAD/EMTDC and MATLAB/SIMULINK show the capability of the proposed UPQC to minimize the major power quality problems in a two feeder distribution system. © 2011 IEEE.