In order to utilize DG unit interfacing converters to actively compensate distribution system harmonics, this paper proposes an enhanced current control approach. It seamlessly integrates system harmonic mitigation capabilities with the primary DG power generation function. As the proposed current controller has two well decoupled control branches to independently control fundamental and harmonic DG currents, phase-locked loops (PLL) and system harmonic component extractions can be avoided during system harmonic compensation. Moreover, a closed-loop power control scheme is also employed to derive the fundamental current reference. The proposed power control scheme effectively eliminates the impacts of steady-state fundamental current tracking errors in the DG units. Thus, an accurate power control is realized even when the harmonic compensation functions are activated. Experimental results from a single-phase DG unit validate the correctness of the proposed methods.