The current paper presents a novel control strategy of a three-phase, four-wire Unified Power Quality (UPQC) to improve power quality. The UPQC is realized by the integration of series and shunt active power filters (APF) sharing a common dc bus capacitor. The realization of shunt APF is carried out using a three-phase, four-leg Voltage Source Inverter (VSI), and the series APF is realized using a three-phase, three-leg VSI. To extract the fundamental source voltages as reference signals for series APF, a zero-crossing detector and sample-and-hold circuits are used. For the control of shunt APF, a simple scheme based on the real component of fundamental load current (I CosΦ) with reduced numbers of current sensors is applied. The performance of the applied control algorithm is evaluated in terms of power-factor correction, source neutral current mitigation, load balancing, and mitigation of voltage and current harmonics in a three-phase, four-wire distribution system for different combinations of linear and non-linear loads. The reference signals and sensed signals are used in a hysteresis controller to generate switching signals for shunt and series APFs. In this proposed UPQC control scheme, the current/voltage control is applied to the fundamental supply currents/voltages instead of fast-changing APF currents/voltages, thus reducing the computational delay and the required sensors. MATLAB/Simulink-based simulations that support the functionality of the UPQC are obtained.