With increased penetration of renewable energy sources in electric grid, maintaining quality voltage at the load terminal has become a challenge. Voltage disturbances like sag, swell, harmonics, etc., can propagate from one section to another section of electric grid and degrade the performance of sensitive loads. This paper explores the capability of smart transformer (ST) to improve the voltage quality in medium voltage (MV) grid, by replacing one conventional power transformer (CPT) with an ST in a multifeeder electric grid. In addition to supplying ST low voltage loads, the voltage regulation in MV grid is achieved by controlling the reactive current injection to the MV grid. Harmonic damping capability is integrated with the control loop to damp out the grid voltage harmonics. An improved stability of MV grid voltage regulation control is achieved in the presence of harmonic damping loop and this is verified with theoretical analysis. Extensive simulation study is carried out to validate the ST features.