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This paper presents a novel fuzzy logic controller in conjunction with phase locked loop synchronization based shunt Active Power Filter (APF) for harmonics and reactive power compensation in the distribution grid due to the non-linear loads. The Mamdani-type fuzzy logic is adpted and this controller is linguistic description, so it does not require a mathematical calculations. The active power filter is implemented with current controlled voltage source inverter (VSI) and is connected at the point of common coupling for compensating current harmonics by injecting equal but opposite harmonic components. The desired reference current(s) are extracted using FLC with PLL-algorithm and this method maintains the dc-side capacitor voltage of the inverter nearly constant. The VSI gate switching signals are derived from adaptive-hysteresis current controller. The adaptive-hysteresis controller changes the bandwidth based on instantaneous compensation current variation; it is used to optimize the required switching frequency. The shunt APF system is investigated and the performances parameters are verified under different non-linear load conditions.