This paper proposes the implementation of a single-phase low cost grid connected axial flux permanent magnet (AFPM) generator system with harmonic mitigation functionality for various types of nonlinear loads. The design, construction and testing of the AFPM generator are given. The method of current reference calculation derived from a combination between power transfer and harmonic compensation for nonlinear loads is described. The synchronization with the grid does not require phase locked loop (PLL). It employs a simple technique based on a sinusoidal look-up table The whole converter system is implemented on a low cost dsPIC30F4011 microcontroller. The simulation and experimental results confirm the validity of the proposed system under various conditions.