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This paper proposes a modified distribution static compensator (DSTATCOM) with the voltage controller. The modified DSTATCOM is incorporated in a three-phase four-wire distribution network. The design criteria of the modified DSTATCOM parameters is introduced. The Hysteresis Voltage Controller (HVC) is used to drive the Voltage Source Converter (VSC) and its reference voltage signal is generated based on the Instantaneous Symmetrical Components Theory (ISCT) to provide the proper compensation to stabilise the system voltage, improve the power factor and mitigate the harmonic distortion. Matlab/Simulink software is used to verify the performance of the modified DSTATCOM with the used controller under different load types and supply voltage conditions. The control algorithm ensures that the bus voltage is maintained at its rated value during different connected loads and supply conditions. Also, it compensates the non-linear and unbalanced supply currents and reducing the Total Harmonic Distortion (THD) of both current and voltage. The proposed modified DSTATCOM gives better results in comparison with the conventional DSTATCOM. [ABSTRACT FROM AUTHOR]