Shunt active power filter (SAPF) has emerged as a promising solution for mitigating harmonic distortions. Due to the interaction between the current inner‐loop of SAPF, source impedance and non‐linear loads, harmonic oscillation issue arises and adversely affects the stability of the system, thus in turn exacerbating the harmonic distortion. However, previous studies paid less attention to the value of phase adjustment in improving the dynamic behaviour of the loop and thus stabilizing harmonic oscillation. Taking the dynamic characteristics between source impedance and non‐linear load into consideration, this paper models and analyzes the SAPF system with source current direct control to reveal the law of full harmonic compensation oscillation. Based on the analysis, an enhanced phase adjustment strategy using load current feedforward is proposed and designed to stabilize harmonic oscillation, while maintaining a favourable trade‐off between stability and harmonic compensation performance. The small‐signal model validated for stability analysis and the effectiveness of proposed stabilization strategy are verified by simulation and experiment.