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This paper proposes a single-phase two-wire inverter system for photovoltaic (PV) power injection and active power filtering (APF) with nonlinear inductor consideration. The proposed system can fully or partially perform APF, process PV power, eliminate harmonic currents, improve power factor, and take into account the nonlinear effect of its output filter inductor. In the system, even though only the utility current is sensed, both APF and maximum power point tracking features can be still achieved, reducing the number of current sensors and cost significantly. To prevent output current from exceeding switch ratings, inverter current is properly controlled through a current estimator and a defined limit circle. A self-learning algorithm is also proposed to determine nonlinear inductance, which can increase the accuracy of the estimated current. Simulations and experimental results have verified the feasibility of the proposed PV inverter system and the algorithm.