Cascaded multilevel inverter is a power electronic device developed to synthesize a desired voltage or current waveforms from several levels of dc voltages making use of its reduced switching stress and modular structure. Such inverters have been recognized as very attractive topologies for implementing shunt active power filters in medium and high voltage applications. This paper presents a five-level cascaded multilevel inverter based Shunt Active Power Filter (SAPF) to compensate reactive power and mitigate the harmonic currents generated by the non-linear loads. The functioning of the proposed system is improved by the inclusion of PI controller for dc-side voltage regulation of SAPF and triangular carrier current controller for the generation of switching pulses for the inverter switches. The control strategy of SAPF also incorporates Synchronous Reference Frame (SRF) theory to extract the harmonic components from distorted line currents which in turn are utilized in the production of required reference compensation currents. This paper primarily focuses on the mitigation of the harmonics produced by the use of nonlinear loads with the aid of PI controller for dc voltage regulation. Extensive simulations are carried out to validate performance of the proposed SAPF system using MATLAB/ SIMULINK for diode bridge rectifier with RL load. The dynamic responses of the proposed SAPF system is verified under varying load conditions.