The effects of power quality (PQ) issues in a distribution feeder occur due to abnormal load condition. In this paper, first, the real time PQ issues in an 11 kV/440 V distribution feeder are measured and analyzed by PQ analyzers. The sudden load fluctuations in the distribution system result in different PQ issues such as voltage sag/swell, transient, flicker and harmonics. Then, an improved interactive distribution static synchronous compensator (D-STATCOM) is installed in distribution feeder to mitigate the PQ issues. A novel control algorithm will operate the interactive D-STATCOM in voltage control mode (VCM) or current control mode (CCM). At normal operating conditions, the D-STATCOM operates in CCM, during abnormal condition the D-STATCOM will operates in VCM to mitigates the PQ issues. The D-STATCOM is modeled and simulated in MATLAB-SIMULINK environment. The field programmable gate array (FPGA)-based laboratory prototype D-STATCOM has been developed to validate the function of the controller.