This paper presents the new control algorithm for three-phase, four-wire distributing system using unified power quality conditioner (UPQC). The UPQC, a combination of series and shunt active filter (AF) with common dc link, is one of the best solution towards the compensation of voltage sag, swell problems and also compensate voltage flicker/imbalance, reactive power, negative sequence current and maintain zero voltage regulation (ZVR) at the point of common coupling (PCC) on distribution system. The series AF is seen by using a three-phase, three leg voltage source inverter (VSI) and the shunt AF is of a three-phase, four leg voltage source inverter (VSI). The proposed model of the UPQC is developed in the MATLAB/SIMULINK environment and the simulation results prove the power quality improvement in the system.