This paper describes dynamic performance analysis of a STATCOM based on 3-level inverter. Major attention is focused on the controller design for 3-level inverter, including regulator design for voltage sharing across the dc link capacitors. A detailed simulation model was developed with Matlab and a scaled hardware model was built and tested to verify the proposed approach. Both simulation and experimental results confirm that the developed controller can regulate the reactive power. The developed controller could be effectively applied to the actual hardware system for STATCOM.