The motivation of this paper is to introduce a new Hebbian least mean square control algorithm for two level self‐supported voltage source converter based distributed static compensator. The Hebbian least mean square controller is employed on the various aspects such as, weight updating, direct and quadrature unit voltage template, active and reactive part of reference supply currents and switching signal generation. Firstly, a set up equations using Hebbian least mean square are premeditated to compute both active and reactive weight updating. Secondly, DC and AC proportional integral controller outputs are involved with the updating weight to generate the reference supply current. The error signal obtained from both reference and actual source current is processed through the hysteresis current controller for the gate signal firing. The MATLAB/Simulink results as well as experimental results prove that the proposed algorithm is competent to afford the better voltage regulation, voltage balancing, source current harmonic reduction and power factor correction. Finally, performance obtained from the proposed controller reveals the applicability for various loading condition in the distribution grid.