In this study, a control algorithm based on non-linear adaptive second-order Volterra filter (NLVF) is utilised to operate the voltage-source converter (VSC). The main role of VSC is to supply compensating current to improve the power quality in wind-based off-grid distributed power generation system. This off-grid system consists of three-phase induction generator, VSC and non-linear loads. The proposed control algorithm is adaptive as well as non-linear in nature. The characteristic of Volterra series is exploited to generate the reference source current for VSC operation. The NLVF estimates the active and reactive weights of fundamental load current for reference current generation. It mitigates the power quality problems created by disturbances in non-linear load or wind oscillations on off-grid system. The solution of power quality problems such as the presence of harmonics in supply current, load unbalance and reactive power compensation is obtained. Nevertheless, voltage and frequency control are also achieved. The VSC is used as a shunt compensator in the system. The entire off-grid system is designed and validated through the laboratory prototype development. The objective of the system is achieved and the steady state and dynamic performance is found satisfactory.