The paper presents a development and implementation of DSP based Distribution Static Var Compensator (DSTATCOM) to compensate unbalanced and non-linear load in power system. A digital signal processor starter kit TMS 320F2812 PGFA is chosen due to its analog/digital input-output compatibility, processing speed and cost effectiveness to implement the shunt compensation algorithm based on instantaneous symmetrical component theory. The detailed design of transducer circuit, signal conditioning circuit, blanking circuit, isolation circuit and power supply circuit are presented. The experimental studies are carried out and the results are discussed. © 2006 IEEE.