Power quality is a major concern in electrical power systems. The power quality disturbances such as sags, swells, harmonic distortion and other interruptions have impact on the electrical devices and machines and in severe cases can cause serious damages. Therefore it is required to recognize and compensate all types of disturbances at an earliest to ensure normal and efficient operation of the power system. To solve these problems, many types of power devices are used. At the present time, one of those devices, Dynamic Voltage Restorer (DVR) is the most efficient and effective device used in power distribution system. In this paper, design and modeling of a new structure of multifunctional DVR for voltage correction is presented. The performance of the device under different conditions such as voltage swell, voltage sag due to symmetrical and unsymmetrical short circuit, starting of motors, and voltage distortion are described. Simulation result shows the superior capability of proposed DVR to improve power quality under different operating conditions. The proposed new DVR controller is able to detect the voltage disturbances and control the converter to inject appropriate voltages independently for each phase and compensate to load voltage through three single- phase transformers.