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Magnetically controlled reactors (MCRs) are usually used as three-phase shunt reactors. They have low harmonic distortion independent of the third harmonic current because most three-phase MCRs are delta connected. However, as arc suppression coils, MCRs are operated in the single-phase mode, and the harmonics can be much higher than those of three-phase MCRs. In this paper, the structure and the mathematical model of a two-stage saturable MCR (TSMCR) are proposed. There are two stages with different lengths and areas in the iron cores. The stages saturate at different times when the TSMCR outputs reactive current. The current harmonics of the first saturated stage can be compensated for when the second stage begins to saturate, to reduce the total harmonics of the output current. The mathematical model that reveals the distribution characteristics of the current harmonics for the TSMCR is also presented. A study of the mathematical model indicates that there are two key factors that affect the total current harmonics of the TSMCR. One is the parameter k, which represents the area ratio of the second stage to the first stage. The other one is the parameter m, which represents the ratio of the length of the first stage to the total length of the magnetic valve in the iron core. The simulations and experiments show that the maximum current harmonics of the novel MCR can be limited to 3.61% of the rated output current when k and m are chosen according to the theoretical mathematical model.