Distributed Static Compensator (DSTATCOM) is a widely used custom power device in distributed network to perform the power quality improvement tasks like harmonics reduction, power factor correction and maintain reduces constant dc bus voltage. This paper investigates a new topology based on a Distributed Static Compensator (DSTATCOM) coupled with a supercapacitor for power quality enhancement. The proposed topology includes of a voltage source converter (VSC) based DSTATCOM, a DC-DC bidirectional chopper and a supercapacitor. The supercapacitor is used to control the reduced dc-bus voltage. The popular instantaneous symmetrical component theory (ISCT) control strategy is used to generate the switching pulses for controlling the IGBTs of the VSC. Simulations of the proposed system have been carried out in MATLAB/SIMULINK environment to show its effectiveness over traditional DSTATCOM for power quality issues.