The Power quality has become one of the most vital issue to both electric utilities and end level users of electric power. Automation has completely changed the load nature due to widespread use of power electronic based drives such as adjustable speed drives, Energy efficient lighting, PC's, office accessories etc. All power electronic based sensitive equipments are the major fatalities of power quality problems such as voltage Sag, Swell, Waveform distortion, Poor power factor etc. In this paper, a three phase three wire Distribution Static Compensator (DSTATCOM) which is fed by Photovoltaic (PV) array is proposed for power quality improvement. The DSTATCOM is a three leg voltage source Inverter (VSI) with a DC link capacitor. Photovoltaic module is used to keep regulate the desired voltage at DC link. The Power quality improvement is achieved in terms of reactive power compensation, Power factor correction, Harmonic reduction, DC voltage control. In this paper, the performance of DSTATCOM is shown for Power factor correction(PFC) and Zero voltage regulation (ZVR) modes using d-q and p-q theories of control. The effectiveness of the PV based DSTATCOM is verified with simulation results. The simulation is carried out on MATLAB software using Simulink and PSB toolboxes. © 2015 IEEE.