Power quality is the important measure of power system. Widespread use of nonlinear loads polluted the power system by introducing harmonics. Many papers have been presented stating different algorithm for reducing the harmonics. One such method is "Instantaneous Reactive Power theory ", also known as p-q theory. p-q theory provides satisfactory results in three phase system. This paper presents investigation on single-phase shunt active power filter using p-q theory. The method includes synchronous d-q reference frame. To develop d-q transformation for single-phase system an imaginary vector is considered and achieved by providing a π/2 delay to the original signal. The performance of shunt APF to compensate load current harmonics is evaluated. The technique is simulated by using MATLAB/Simulink. © Research India Publications.