Nonlinear loads and power electronics components inject harmonics into the connected power system, which affects the power quality of the system. Harmonic suppression, reactive power compensation, and load balancing can be accomplished with the use of shunt converters. This paper proposes a proportionate normalized least mean M-estimate controlled shunt converter to separate the distorted load current’s active and reactive components. The control algorithm introduces the M-estimate based cost function, which helps remove the impact of impulsive noise on weight update. The shunt converter is designed to balance load, compensate for reactive power, and reduce harmonics in the distribution system. To determine the proposed control algorithm’s robustness, the system is tested under a variety of linear and nonlinear load scenarios. The proposed control is compared to four existing control strategies to demonstrate its effectiveness in evaluating the components of load current. Experimental analysis is carried out through real-time simulation analysis using the dSPACE 1202 processor. The proposed system is validated to comply with the IEEE-519 standards.