Dynamic Voltage Restorers (DVRs) are classified as Custom Power devises and mainly used to combat voltage variations in distribution networks. When a DVR is to be used for the compensation of deep and/or long voltage sags, then the use of energy storage devices becomes indispensable. This, in turn, will increase the cost of the system. Many critical loads or load areas are supplied by more than one feeder. In such cases, if it is planned to install DVR in more than one feeder, then the dc link of multiple DVRs can connected together, as in IPFC structure. Therefore, the active power can be exchanged between various DVRs. This scheme is called Interline DVR or IDVR. By using IDVR the compensation range of each feeder can be substantially increased without the need for energy storage devices. In this research, the equations governing the steady-state operation of IDVR are obtained. Both balanced and unbalanced voltage sags are analyzed. Comparison is made between compensation capability of IDVR and separate DVRs. Application of existing DVR compensation strategies in IDVR is evaluated and their shortcomings are addressed. A new design strategy is proposed with the aim of reducing the total IDVR rating.