This paper presents a new control scheme for a voltage source active filter (AF) which compensates, simultaneously, the harmonics and reactive power of nonlinear loads. The reference compensating currents are estimated from computed reference supply currents and sensed load currents. Reference supply currents are estimated using the active power of the load and the AF. A hysteresis or carrier-based PWM current control scheme is employed to generate the gating signals to the devices of the AF. A three-phase diode rectifier with capacitive resistive loading is used as a nonlinear load. Experimental results of a DSP-based prototype are presented to confirm the effectiveness of the new control scheme.