Abstract - In this paper a grid-interfacing converter system with voltage and current harmonics compensation capability is considered. The idea is to integrate the power generating functions of the converter with the power filter harmonic mitigation capabilities. The analysis of compensation characteristics of different hybrid power filter  configurations is carried out. The control method based on adaptive digital system processing is proposed. The current detecting scheme independently controls fundamental current and harmonic distribution system currents. Computation of the harmonic compensation current is performed by the adaptive notch infinite impulse response (IIR) digital filter. The filter`s parameters are made adaptive with respect to the grid frequency fluctuations. MATLAB/SIMULINK power system toolbox is used to simulate the proposed system. The presented simulation results confirm the effectiveness of the proposed method.