In this paper, a Z-source hybrid active power filter is proposed to compensate the harmonics and reactive power in power distribution system. The proposed system is composed of a 7th harmonics-tuned passive filter and an active power filter with a Z-source inverter topology, while voltage source PWM inverter or current source PWM inverter are applied as the power converter topology of conventional active power filters. The Z-source impedance network along with shoot through capability would ensure a constant DC voltage across the DC link. A polymer electrolyte membrane fuel cell is employed as an compensation DC energy source of the proposed system and its equivalent R-L-C circuit is modeled for simulation. As the compensation and control algorithm of the proposed system, the current synchronous detection algorithm is applied. The simulation analysis by PSIM is performed under the three-phase 220V/60Hz voltage source and 25A nonlinear diode loads. The effectiveness of the proposed the system is verified in the steady and transient states.