The design of reliable power filters that mitigate current and voltage harmonics to meet the power quality requirements of the utility grid is a major requirement of present-day power systems. In this paper, a detailed systematic approach to design a shunt active power filter (SAPF) for power quality enhancement is discussed. A proportional–integral (PI) controller is adopted to regulate the DC-link voltage. The instantaneous reactive power theory is employed for the reference current’s extraction. Hysteresis current control is used to obtain the gate pulses that control the voltage source inverter (VSI) switches. The detailed SAPF is developed and simulated for balanced nonlinear loads and unbalanced nonlinear loads using MATLAB/Simulink. The simulation results indicate that the proposed filter can minimize the harmonic distortion to a level below that deployed by the Institute of Electrical and Electronics Engineers (IEEE) standards.