In this paper, a three-phase three-wire Distribution STATic COMpensator (DSTATCOM) which is fed by Photovoltaic (PV) array or battery operated DC-DC boost converter is proposed for reactive power compensation, source current harmonic reduction and load compensation in the distribution system. The proposed DSTATCOM consists of a three-leg Voltage Source Converter (VSC) with a dc bus capacitor. The PV array or battery operated boost converter is proposed to maintain the dc link voltage of the dc bus capacitor for continuous compensation for the load. This paper presents to evaluate the performance comparison of two control strategies for extracting the reference currents to control the proposed DSTATCOM. The two control methods are Synchronous Reference Frame (SRF) theory and IcosΦalgorithm. The switching of VSC will occur by comparing the source current with the reference current using Hysteresis based PulseWidth Modulation (PWM) current controller. The performance of the DSTATCOM is validated using MATLAB software with its simulink and Power System Blockset (PSB) toolboxes. The simulation results for the two control methods are compared to validate the superior performance of the IcosΦalgorithm. By comparing, the source current THD is reduced to acceptable level 5% of IEEE-519-1992 in IcosΦmethod.