In this effort, a DSTATCOM (Distribution Static Compensator) is employed for control of a distributed power generating system by a proposed composite observer based control technique. The suggested control technique is employed for fundamental components extraction of distorted load currents. These extracted components are used in estimation of reference source currents to generate gating signals of DSTATCOM. The proposed control technique is employed for mitigation of reactive power, distortion in term of harmonics and load balancing under linear/nonlinear loads. The performance of DSTATCOM is observed satisfactory for these consumer loads with regulated generator voltage at point of common coupling (PCC) and self-supported DC link of VSC of DSTATCOM.