To avoid the negative effects of using a control signal with a ripple, which is generated by the feedback of measured active power filter (APF) variables, a nonlinear observer is employed in this paper. The observer design, through the use of exact TS models and Lyapunov-based LMI conditions, is achieved. Both the APF output current and the DC voltage are estimated by the observer, and they are used in the cascade control feedback. In this way, high gains in the inner control loop are employed, giving place to a control signal without undesired harmonic components or overmodulation. This allows an APF performance improvement for compensation tasks and for reducing the undesired components injection to the mains. A simulation and experimental comparison between APF results using observer and APF results without using observer is presented. Better results are achieved for the observer version case, reducing the THD from 47.6% to 4.8% in experimental conditions, satisfying the IEEE Standard 519TM-2014. Also, load change tests are carried out, where the stability of the system is kept. Moreover, by using the observer, a DC voltage sensor was not required, reducing the number of system sensors.