The current paper presents a novel control strategy of a three-phase, four-wire Unified Power Quality (UPQC) to improve power quality. The UPQC is realized by the integration of series and shunt active power filters (APF) sharing a common dc bus capacitor. The realization of shunt APF is carried out using a three-phase, four-leg Voltage Source Inverter (VSI), and the series APF is realized using a three-phase, three-leg VSI. To extract the fundamental source voltages as reference signals for series APF, a zero-crossing detector and sample-and-hold circuits are used. For the control of shunt APF, a simple scheme based on the real component of fundamental load current (I $Cos{Phi}$) with reduced numbers of current sensors is applied. The performance of the applied control algorithm is evaluated in terms of power-factor correction, source neutral current mitigation, load balancing, and mitigation of voltage and current harmonics in a three-phase, four-wire distribution system for different combinations of linear and non-linear loads. The reference signals and sensed signals are used in a hysteresis controller to generate switching signals for shunt and series APFs. In this proposed UPQC control scheme, the current/voltage control is applied to the fundamental supply currents/voltages instead of fast-changing APF currents/voltages, thus reducing the computational delay and the required sensors. MATLAB/Simulink-based simulations that support the functionality of the UPQC are obtained.