The control algorithm for STATCOM based on direct power control (DPC) has been proposed in the paper. The reactive power and voltage in AC grid could be controlled instantly with the help of instantaneous reactive power theory. Under the sufficiently high sampling frequency and switching cycle, the power error is very small and which makes the STATCOM be controlled quickly and accurately. The DC voltage controller and phase compensation technique has been used to the system because of the impaction that induced by the DC voltage fluctuations and data detects delay. The system has been simulated by PSCAD, from the result simulation it could be seen the advantages that the voltage and reactive could be controlled quickly, the DC voltage is stabile and has little harmonic in the AC current.