In this paper a new multilevel STATCOM based on cascaded two level inverter is proposed. This topology has better utilization of dc link voltage and low THD. It consists of two conventional three phase two level inverters connected in cascade. The cascaded inverter uses 12-sided polygonal voltage space vectors. To obtain 12-sided polygonal voltage space vectors, the dc link voltage of inverter-2 must be maintained at 0.366 times dc link voltage of inverter-1. A simple control strategy is proposed for reactive power compensation as well as to maintain dc link voltages at the required levels. Simulation studies are carried out to predict the system performance. A laboratory prototype is also developed to validate the results obtained by simulation.Index Terms-Multilevel inverter, 12-sided voltage space vector polygon, STATCOM, Voltage unbalance.