ABSTRACT This paper proposes the design and optimization procedure for a low cost single-phase Static Synchronous Compensator (STATCOM) based on Cascaded H-bridge Multilevel Converter (CHBMC) topology. The CHBMC consists of two series-connected identical H-bridge converters so that five voltage levels at the AC side of STATCOM are attained. After summarizing the basic STATCOM operation and the modelling of the CHBMC topology, the STATCOM model connected to a 220 V single-phase grid is simulated in order to verify closed-loop operation of the STATCOM. In this study, two PI controllers are used for reactive power control and regulating the average DC link voltage of the two H-bridge converters. The optimization of the PI controller parameters are achieved by particle swarm optimization method. Finally, the hardware design of a small power rated of single-phase STATCOM connected to 220 V grid is realized and verified experimentally. Phase shifted multi-carrier sinusoidal pulse width modulation is chosen to drive the MOSFET switches. It is shown that STATCOM is able to be operate both in capacitive and inductive mode of operation and injects the desired amount of reactive power into the grid. The advantages of the developed prototype are low-cost, easy to implement and upgradable to higher voltage/power levels.