This paper presents a novel synchronous reference frame based (SRF) control strategy for shunt hybrid active power filter (SHAPF). The control strategy includes a direct current control (DCC) and an indirect current control (ICC) strategy. SHAPF can achieve harmonic compensation and dynamic reactive power compensation with the proposed controller. In this proposed method, as distinct from studies in literature, dynamic reactive power compensation and dc link voltage control is realized with ICC and harmonic current compensation is realized with DCC. Also, the proposed controller provides a variable SHAPF dc link voltage which is adjusted according to the reactive power compensation requirements in order to decrease the switching losses of converter and achieve power savings. The performance of proposed controller is verified with experimental results.