-This paper deals with an alternative current reference generator algorithm proposition, which is employed to inject active power into the grid and, simultaneously, performs reactive power compensation and load harmonic current suppression in single-phase grid-connected photovoltaic (PV) systems. The PV system reference current is computed based on synchronous reference frame method, which operates in conjunction with the dc-bus controller. In addition, by adopting a proper strategy, it is proposed criteria for establishing the priority on the power compensation by the PV system, in order that the power rating of the gridconnected PWM converter is not exceeded. The Perturband-Observe maximum power point tracking technique is employed to generate the dc-bus voltage reference for extracting the maximum power from the photovoltaic array and, therefore, maximizing its efficiency. Both simulation and experimental results are presented to verify the static and dynamic behaviors of the grid-tied photovoltaic system, as well as evaluate its performance. 1