Shunt active power filter (APF) method have been used by many researchers as a solution in reducing the harmonics creating by the non-liner loads. Therefore, this research is targeted to design and implement a three-phase shunt APF employing Kalman filter estimator. Conventionally, low-pass filter (LPF) is used to filter out the unwanted DC component of the non-linear load to produce the sinusoidal waveform called the reference current. However, when applying LPF it contributes with the phase shift and high transient at the supply current. Therefore, to reduce these problems, the digital Kalman filter estimator is used to replace the LPF for generating the reference current. Details on the investigation between conventional and proposed methods under simulation based on Matlab Simulink platform and experimental that are made for two types of load, namely, three-phase rectifier with RC-load and three-phase induction motor, are presented. The performance criteria of the shunt APF are determined by the supply current waveform, total harmonic distortion (THD), harmonic spectrum and power quality measurements, which were also obtained by simulation and experimental. In conclusion, by employing Kalman filter estimator for generating the reference current, it reduces the time delay and high transient current at the power supply and, thus, improved the overall THD from 0.1 to 0.42% compared to the LPF.