ABSTRACT : Dynamic Voltage Restorer (DVR) has become very popular in recent years for compensation of voltage sag and swell. The voltage sag and swell is very severe problem of power quality for an industrial customer which needs urgent attention for its compensation. There are various methods for the compensation of voltage sag and swell. One of the most popular methods of sag and swell compensation is Dynamic Voltage Restorer (DVR), which is used in both low voltage and medium voltage applications. In this work, our main focus is on DVR. DVR compensate the voltage sag by injecting voltage as well as power into the system. The compensation capability of this is mainly influenced by the various load conditions and voltage dip to be compensated. In this work the Dynamic Voltage Restorer is designed and simulated with the help of Matlab Simulink for sag compensation. Efficient control technique (Park’s Transformations) is used for mitigation of voltage sag through which optimized performance of DVR is obtained. The performance of DVR is analyzed on various conditions of active and reactive power of load at a particular level of dc energy storage. Parameters of load are varied and the results are analyzed on the basis of output voltages.