Voltage stability and reactive power compensation are one of the most important problems in power systems. Traditionally, fixed, mechanical switched reactor/capacitor banks and Static Var Compensator have been used for voltage stability and reactive power compensation. In recent years, applications of FACTS (Flexible Alternating Current Transmission Systems) devices have been growing up for reactive power compensation in transmission and distribution systems, since their response is faster than that of the conventional compensators. Distribution STATCOM (D-STATCOM) is a FACT device used to improve the power quality issues in distribution systems. Control of D-STATCOM is generally realized by PI controllers with fixed parameter. However, desired control performance couldn’t be obtained due to nonlinear structure of D-STATCOM.In this paper, Fuzzy-PI controller which has a nonlinear and robust structure is proposed control of D-STATCOM’s d and q-axis currents. Simulation of Fuzzy-PI current controlled D-STATCOM is performed by MATLAB/Simulink software. In simulation, dynamic response of D-STATCOM is observed by changing the reference reactive current. Simulation results compared with conventional PI controller are given.