An AC distribution system has a myriad of loads connected at the system bus. Many of the DC based loads cause disturbance on the ac bus due to high harmonic load currents. Traditionally passive filters are used for filtering these load harmonics. Recent technological advances have enabled the use of high frequency switching devices in the development of active filtering techniques.  In this thesis, an active filter topology was selected for the system, and a test system was modeled using EMTP. The objective of active filtering is to meet the harmonic and reactive load locally, and thus removing the harmonic content of source currents. The AF controller based on the on-line power computation scheme was modeled. Tracking control was demonstrated using two control methodologies - hysteresis band control and sliding mode control.  A performance comparison was made between the two control schemes, and the impact of various circuit and control parameters on the filtering performance was studied. To assess the transient performance achieved with the control schemes presented, results from EMTP based studies for this distribution system under various AC-DC fault conditions are analyzed.