This paper discusses the development of a reactive power controller using digital signal processing. Digital Signal Processing is the technique of using digital devices to Process continuous signals or data, often in real-time. And DSP algorithms are associated with a discrete time interval between input samples. When one designs a digital filter, one can use a Laplace transform to determine the continuous time frequency response. The corresponding discrete time transform is called Z transform and depends upon discrete samples of the input spaced equally in time. The objectives of this paper are to minimize real power losses and improve the power factor of a given system. Also, the implementation of a direct-form non recursive filter on the TMS320C31 has been described. The application of this microprocessor-based controller using DSP on test system reveals its numerous advantages. Performance and features of the controller for the reactive power control are analyzed.