Due to development of industries, power factor and harmonic pollution have become serious concerns in the power system. This thesis presents an adaptive linear neuron (ADALINE) - based static synchronous compensator (STATCOM) to cope with power quality issues in the industrial power system. The targeted compensating current of the STATCOM is generated based on the so-called LMS algorithm, thus the compensated system current becomes balanced and active even in reactive, unbalanced or distorted loads. In this thesis, the STATCOM is realized by using a three-level neutral point-clamped (NPC) inverter with the in-phase level-shifted sinusoidal pulse width modulation (IPLSPWM). Theoretical analysis of ADALINE method is detailed and hardware implementation of STATCOM is conducted to validate effectiveness of the proposed approach.