Recently, new generation systems using solar cells or fuel cells are under development. Particularly, it is expected that small scale, utility interactive, dispersed PV system will be widely diffused in the near future. The inverter used in coupling the PV array with utility lines is an important factor determining the overall performance of power generation systems. This paper presents the design and control method of the single-phase PV inverter system that is capable of compensating reactive power including harmonic distortions. It is shown that reactive power caused by rectifier load can be compensated by the proposed inverter system.