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This paper presents a new control scheme for a shunt hybrid power filter. The control system includes two main loops. First control loop is for generating harmonic component of the active filter reference voltage. In this control scheme no harmonic extracting circuit is used and hence, it has not instability problem due to time delay of the signal processing required in the conventional control schemes. The second control loop is used for generating a fundamental component voltage for the reactive power compensation. In harmonic compensation mode, the active filter forces harmonic current of the nonlinear load to flow into the tuned passive filter and improves its filtering performance. In fundamental compensation mode, the active filter injects a fundamental component voltage with such a magnitude to adjust the reactive current of passive filter according to the reactive demand of the nonlinear load, thereby making the line current in-phase to the system voltage. Computer simulations have been carried out for a typical power distribution system including a three-phase thyristor controlled rectifier as the nonlinear load. The results presented imply a proper performance of the proposed scheme in both steady state and dynamic conditions.