The severe power quality problems aroused by the single-phase 25-kV traction power supply system (TPSS), especially for the voltage unbalance (VU) and high-frequency harmonic resonance, have attracted increasing attention nowadays. In this paper, a novel hybrid power quality compensation system, including a power flow controller (PFC) and thyristor-controlled L and C-type filter (TCL-CTF), is proposed. The PFC can be used for VU compensation, and the TCL-CTF can be designed to filter out harmonics as well as compensate reactive power. Furthermore, an optimized compensation strategy is proposed, and the power quality of the TPSS can meet the requirements of the technology standard. Compared with the conventional scheme, the compensation capacity of the PFC can be reduced by 12%, as well as the cost. Finally, the effectiveness of the proposed system is verified by the simulation and experimental results.