Active power filter, a good alternativeforeasing power quality problems. APF can provide an effective solution for the removal of hormonic current present in power system. The performance of shunt APF depends on technique used to generate reference current, controlling method used and topology of inverter under consideration. In this paper a fuzzy logic-based control scheme was presented to generate reference signal for hysteresis current controller of three phase VSI. Unit template based control algorithm for control signal generation and fuzzy logic controller was used to replace PI controller to improve performance. The proposed system is very much capable in maintaining and improving power quality at distribution side. The shunt APF performance was analysed with SIMULATION model under balanced condition and outcome obtained satisfactory in improving the power quality.