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Survey results suggest that 92% of interruption at industrial facilities is voltage sag related. The voltage sag compensator, based on a transformer-coupled series-connected voltage-source inverter, is among the most cost-effective solution against voltage sags. When voltage sags happen, the transformers, which are often installed in front of critical loads for electrical isolation, are exposed to the disfigured voltages and a dc offset will occur in its flux linkage. When the compensator restores the load voltage, the flux linkage will be driven to the level of magnetic saturation and severe inrush current occurs. The compensator is likely to be interrupted because of its own overcurrent protection, and eventually, the compensation fails, and the critical loads are interrupted by the voltage sag. This paper proposes an inrush current mitigation technique together with a state-feedback controller for the voltage sag compensator. The operation principles of the proposed method are specifically presented, and experiments are provided to validate the proposed approach.