This paper proposes a control scheme to control the microgrid side voltage–source converter ( G-VSC) using instantaneous symmetrical components theory. The G-VSC with proposed control can be utilized 1) as a bidirectional power sharing converter to control the power flow from the dc side to the ac side and vice versa, based on renewable power available at the dc link; 2) as a power quality compensator with the features of reactive power compensation, load balancing, and mitigation of current harmonics generated by nonlinear loads at the point of common coupling, thus enabling the grid to supply only sinusoidal current at unity power factor; and 3) to damp out the oscillations in the G-VSC currents effectively using damping filter in the control algorithm. The mathematical models are derived and stability aspects are analyzed in detail through the frequency domain approach. The multifunctional features of the proposed control algorithm are demonstrated using extensive simulation studies and are also validated through experimental results.