The LC resonance between the line inductor and the dc-link film capacitor is an important concern in the reduced dc-link capacitance interior permanent magnet synchronous motor drive system. In this paper, an active damping method based on the virtual damping resistor is applied to suppress the LC resonance and improve the drive system stability. The performance of the damping resistor is analyzed in a systematic level, and possible configurations have been analyzed to obtain the optimal solution, which is proved to be the inductor current feedback (ICF) damping method. In order to realize the equivalent damping effect, the dc-link voltage feedback is applied to emulate the ICF-based active damping method by a step-by-step approach. Meanwhile, the grid voltage distortion will stimulate additional harmonics of the grid current in the reduced dc-link capacitance motor drives. Hence a feedforward compensation method is applied to suppress the grid current distortion arising from the distorted grid voltage, which has not been investigated in the previous related researches. Harmonics of the grid current are reduced and requirements of EN61000-3-2 can be satisfied by applying the proposed method. Experiments on a compressor drive platform equipped with the reduced dc-link capacitance are performed to verify the effectiveness of the proposed method.