In this paper, a D-STATCOM is used for improving the power factor at the load end. The degree of utilization of the power depends on the power factor of the loads connected to the network. Most of the loads in the distribution line, being inductive in nature, consume much of the reactive power. As a result, the power factor of the load deteriorates, leading to the limitation of the active power flow in the line. Consequences of low power factor are higher current, increased losses and voltage dip in the line. This necessitates reactive power control for load compensation. This paper aims at developing a D-STATCOM, based on voltage-source converter, to improve the power factor of the load locally by injecting suitable reactive power in the power distribution line. The amplitude of the output voltage of the D-STATCOM is made leading to the system voltage for the purpose of controlling the VAR generation. Thus it can internally generate capacitive reactive power to be used for shunt compensation. Hysteresis controller is employed for controlling the D-STATCOM. The implementation of the D-STATCOM and hysteresis controller is carried out in MATLAB/Simulink.