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This paper proposes a approach to filter the harmful harmonics using a five-level diode-clamped converter based shunt active power filter. A multi-level converter provides superior filtering performance however, it suffers from a voltage imbalancement in its DC-link. Therefore, a novel control method for an auxiliary balancing circuit and a pulse-width modulator are also proposed. The mathematical model of the filter is derived through its state-space equations. This model is then be used to design linear controllers. To validate the proposed filter a model was constructed and simulated in Matlab/SimPowerSystems®. Preliminary results show that the filter can effectively reduces harmonics while keeping its DC-link balanced.