Decentralized grid-connected photovoltaic (PV) system with reactive power compensation has been gaining increasing attentions due to its outstanding performance. But with traditional control strategies, unbalanced voltages caused by loads will greatly affect the compensation performance and in severe case may even cause it shut down for overcurrent protection. This paper presents a novel fundamental reactive current detection method and an integrated control strategy, which combines active power generation with reactive power compensation. The scheme employs instantaneous reactive power theory for reactive power compensation and voltage space vector pulse width modulation (VSVPWM) for harmonics elimination. The principle of operation and the control strategy is described and the results of simulation are presented to demonstrate the performance of the proposed system.