A novel sliding mode control (SMC) method for indirect current controlled three‐phase parallel active power filter is presented in this paper. There are two designed closed loops in the system: one is the DC voltage controlling loop and the other is the reference current tracking loop. The first loop with a PI regulator is used to control the DC voltage approximating to the given voltage of capacitor, and the output of PI regulator through a low‐pass filter is applied as the input of the power supply reference currents. The second loop implements the tracking of the reference currents using integral sliding mode controller, which can improve the harmonic treating performance. Compared with the direct current control technique, it is convenient to be implemented with digital signal processing system because of simpler system structure and better harmonic treating property. Simulation results verify that the generated reference currents have the same amplitude with the load currents, demonstrating the superior harmonic compensating effects with the proposed shunt active power filter compared with the hysteresis method.