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This paper addresses the nonlinear controller design and the stability analysis of a shunt active power filter (SAPF) interfacing a solar photovoltaic (PV) system that consists of a couple of PV panels, a single‐phase two‐stage IGBT half‐bridge SAPF and two identical DC link capacitors. We seek for the considered system the fulfillment of three control objectives: (a) extracting the maximum PV power using an appropriate maximum power point tracking (MPPT) algorithm; (b) regulation of the DC link capacitor voltages to the reference provided by the MPPT controller hence ensuring the exchange of power between the PV source and the AC power grid; (c) compensation for reactive power and undesired harmonics caused by the nonlinearity of electronic power loads, that is, performing power factor correction (PFC). The control objectives are achieved using a new two‐loop cascaded controller. The Backstepping approach is applied in the inner loop to perform PFC. A filtered proportional‐integral (PI) controller is applied in the outer loop to ensure tight regulation of the PV voltage. The MPPT control is implemented using a perturb‐and‐observe (PO) algorithm. The performance of the closed‐loop system under the two‐loop control strategy is formally analyzed through the Lyapunov approach applied to the averaged model. Numerical simulations are performed in MATLAB/SimPowerSystems environment to validate the design methodology and to confirm the theoretically predicted performances of the system under the proposed nonlinear controller. [ABSTRACT FROM AUTHOR]