This paper proposes control of a three-leg fourwire grid-connected converter with multifunction namely power transfer to grid and active power filter for nonlinear loads. Reference currents are calculated on the basis of the p-q theory for a power transfer function and derived from load currents for an active filter function. An adaptive hysteresis current controller is used for tracking the reference currents. As a consequence, the proposed system provides fast response and nearly constant switching frequency. The proposed system is verified by simulation using MATLAB/Simulink.