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Shunt active power filter (APF) has been proven as an effective method to overcome various power quality issues such as reactive power unbalance, unbalanced source currents and large harmonic and neutral currents resulted due to the proliferation of nonlinear loads. Optimizing the performance of APF using conventional mathematical modeling based linearized approaches is quite difficult because of the highly complex, nonlinear and non-stationary nature of power system networks that involve large number of inequality constraints. This paper proposes the implementation of Bacterial foraging optimization (BFO) to optimize the APF performance for load compensation under distorted supply voltage condition and sudden load fluctuation. Extensive MATLAB/Simulink based simulations were carried out and results demonstrate that the performance of BFO algorithm is superior compared to conventional approach in terms of both convergence rate and solution quality.