This paper proposes a time domain methodology for harmonic state estimation (HSE) in power systems. The proposed methodology is formulated to analyse the unbalanced operation of three-phase power systems including nonlinear loads. It takes into account the optimal number of measuring devices and exploits the property of half-wave symmetry in voltage and current waveforms to significantly reduce the computational effort of the solution process. The results obtained are in closely agreement with the actual response obtained from the time domain power system simulation performed with the SimPowerSystems toolbox of Simulink®. Hence, the proposed methodology can adequately assess the harmonic state in unbalanced power systems. The results show a considerable reduction in the instrumentation resources and time processing needed for HSE in nonlinear power networks.