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Configuration of static var compensator (SVC) in the distributed grid with DGs is a widely adopted and effective measure to improve the power quality. As SVC itself is harmonic source, the paper proposed to add harmonic compensation link in the current inner loop of DG grid-connected inverter on the premise of not increasing hardware cost, in order to suppress the harmonic generated by local load and SVC. For the existing SVC control method is difficult to adapt DG's characteristics of intermittent and fluctuation, the SVC voltage control strategy based on optimal recursive integral PI is put forward in the paper. The paper analyses the control stability of the system with filtering design. The intelligent and high power quality system of inverter-based distributed generation with SVC could not only provide active power, but also compensate for voltage fluctuation quickly along with eliminating harmonic produced by local load and SVC. It could further reduce the condition for distributed power connects to grid and improve the power quality of distributed generation. Simulation verifies the feasibility of the system.