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Unbalanced input voltages can degrade the performance of voltage-source converters (VSC) by injecting a second harmonic voltage component onto the dc link voltage (120 Hz for 60 Hz system) that reduces the dc link capacitor lifetime and disturbs the performance of the attached inverter load. These negative effects can be eliminated if the voltage-source converter includes an active front-end (AFE) converter stage with appropriate control. New observer-based disturbance estimation and control algorithms are introduced in this paper that compensate source voltage unbalances. The algorithms are also designed to compensate the detrimental impact of delay effects caused by the digital signal processing. Consequently, these techniques are appropriate for higher-power systems with reduced PWM switching frequency and limited current controller bandwidth. Analytical, simulation, and experimental results are presented to illustrate the effectiveness of the new observer-based control techniques.