One of the largest nonlinear and time variant loads in a power system are Arc furnaces, which are usually used in steel industry to melt iron. Due to their nonlinear and stochastic characteristics, they make lots of power quality problems such as harmonics, flicker, unbalanced voltage/ current and so on. These problems cause undesirable effects on power system and their equipment. Therefore performance analysis of arc furnacesfor their performance improvement is necessary. One method for improving power quality in arc furnace is Static Var Compensators. SVC is a variablereactance parallel to load, which absorbs or produces reactive power and through which regulates the voltage amplitude at PCC. So in this thesis, application of SVC for improvement of power quality for arc furnaces is discussed.Voltage flicker is one of the important power quality problems; therefore, flicker penetration in upstream system is considered, then control of SVC as a solution for improving flicker is discussed. Additionally a method for computing and estimating arc furnace flicker is provided, then effects of working several arc furnaces and their interaction are simulatedwhich are compared with practical measurements. Since capacitor banks are used as tuned passive filters which are tuned for specific frequency with TCR, method of determination the reactive power capacity of total harmonic filters and TCR’s are discussed to adjust power factor as well as current harmonics. The filters are analyzed to check for the possibility of parallel resonance.Also, the current unbalance caused by the stochastic performance of arc furnace can be controlled in our algoritm by independent control of each phase. The algoritm has been implemented on Mobarakeh steel plant SVC and simulation results are compared with measured results. Keywords: Static Var Compensator, Electrical Arc Furnace,Harmonic Filters, Power Quality.