This paper presents the modelling and implementation of a three-phase DST ATCOM (Distribution Static Compensator) using an efficient control algorithm for power conditioning. This is one of an effective way for harmonic suppression, load balancing and reactive power compensation at distorted PCC (Point of Common Coupling) voltages under nonlinear loads. It is hoped at providing a broad perspective on the status of DSTATCOM control methods to researchers and application engineers dealing with harmonic cancellation issues. The proposed scheme consists of a zigzag transformer, double tuned filter, rectifiers, voltage source converter of the DST ATCOM. A fuzzy logic controller & traditional PI controller are used to control the neutral current & dc link voltage under both balanced & unbalanced loading conditions. Simulation studies are showing the better performance of three-phase DSTATCOM using MAT LAB SIMULINK & power system toolboxes.