In this paper, modeling and control system design of a three-phase VSC system are investigated. The linear model and the control design are developed in the stationary-frame. The model shows a highly coupled system along and coordinates when using a -Y transformer vs. two completely decoupled subsystems in the case of Y-Y transformer. This issue was often overlooked in literature. The developed model includes the phase shift caused by the -Y transformer to address its effect on the steady-state and the dynamic behaviors under balanced and unbalanced distorted three phase conditions. Linear state-space model of the closed-loop system is developed to study the dynamics and stability of the two configurations. Modal analysis shows that the phase shift introduced by the -Y configuration can reduce the ultimate gain of the open loop system by 62% as compared to the system interfaced using Y-Y configuration. The developed linear model has been simulated in MATLAB/SIMULINK and validated using a detailed switching model in PSCAD/EMTDC under balanced and unbalanced three-phase conditions. The proposed control method can provide fast active and reactive power control with a minimum harmonics distortion in the line current.