Increment of using nonlinear loads in power grids has cause to intensify harmonics in these systems. The dispersion of loads with high distortion rates can cause different issues in low voltage grids. For instance, the amplitude of third-order harmonics is more than 80 percent in LED lamps. As well as these kinds of lamps, the other loads in the distribution system such as low-power lamps, TVs, monitors, printers and so forth also have high percentage of harmonic currents. Harmonics in power grids can damage other loads and grid equipment and also increase energy losses in network. For example, they affect transformers, motors, cables, measurement, protection devices and so forth . Harmonic Distortion also lead to their improper performance and reduce their lifespan besides increasing losses. In addition, they occupy the capacity of transmission lines and transformers and subsequently increase need for investment in power systems. The domain of current harmonics in the distribution system is third-order harmonic which mostly exhibits common electrical angle on all three phases. Thus, this frequency component from the three-phases will be added up and flow through the neutral wire of transformers. Therefore, the amplitude of neutral wire current is often high in these transformers. In some measurements, the amplitude of neutral wire current is higher than three phases current. Based on mentioned points, it is necessary to consider proper solutions to reduce negative effects of this issue. In this thesis, after studying the effects of harmonics on different equipments of power grid, such as transformers, induction motors, capacitor banks, and etc. different methods for designing various passive filters such as high-pass filters and C type filters will be investigated. Forthermore, international standards on designing passive filters, especially selection methods of their components will be reviewed.Thence, anumber of common loads and their harmonics in power grids will be analyzed. In addition, voltage and current harmonics in distribution transformers will be studied in order to investigate the overall behavior of loads. One of the most common methods for compensating current harmonics is designing of passive filters, however, using these kinds of filters in low-voltage grids have some challenges. In the following section, the challenges of designing these filters will be reviewed and some practical solutions will be presented. Afterward, the effects of mentioned solutions on frequency response of passive filters will be discussed. Then, a brief review of utilizing the earth transformer as one of the third-order harmonic current reduction methods will be considered and possible changes on frequency response curve will be studied. At the end, designing and manufacturing of a harmonic filter by focusing on compensating current harmonics will be discussed. Key Words: Current Harmonics, Distribution System, Grounding Transformer, Passive Filter, Power quality, Zero sequense