This paper presents a new compensating system, consisting of series and shunt active filters, for mitigating voltage and current disturbances. The shunt filter is used to compensate for unbalanced and distorted load currents. The series filter comprises two inverters, used to suppress voltage disturbances and handle source currents independently. This configuration is devised to reduce the overall cost of active compensators by using low-frequency high-current switches for the latter inverter. The filters are controlled separately using a novel control strategy. Since voltages at the point of common coupling contain interharmonics, conventional methods cannot be used for extracting voltage references. Therefore, voltage references are obtained from generated sinusoidal waveforms by a phase-locked loop. Current references are detected based on rotating frame vector mapping. Simulation results are presented to verify the system.