The compensating choke plays an important role in many high-power industrial applications with reactive power compensation. Due to the high number of devices installed every year and the EU’s efforts to reduce the energy demands of our society, it is advisable to maximize the efficiency of these devices. Due to the non-linearity of the magnetic core, the requirement of a linear operating characteristic, and the presence of a distributed air gap, this is a difficult task, with various technical challenges. This paper presents an analytical method for the electromagnetic design of a three-phase compensating choke with an air-gapped core and a flat load characteristic. The design method considers the fringing magnetic fields and the current-density dimensioning based on an advanced analytical thermal model. The proposed method is based on the use of existing analytical procedures; however, optimization was conducted to achieve a trade-off between the core and the I2R losses to manipulate the efficiency and the weight and identify optimization possibilities. The presented method was verified by the finite element method (FEM) using the engineering-simulation software, ANSYS.