Different condition of unbalanced current of three-phase four-wire low-voltage distribution system is analysed in this paper. The model of unbalanced reactive power compensation is built which is fit for the three-phase four-wire system ,Using phase-to-phase or phase-to-earth capacitance or inductance can transfer active power. Control the neutral current to be zero and three-phase current balanced by means of reactive power compensation. A compensating phase judgment approach is presented, the mathematic model of calculating phase current, phase compensating capacity line current and line-to-line compensating capacity is gave. Simulation result of physical system shows that the neutral current can be controlled to be zero and the phase current balanced. It substantiate that this compensation method is valid and optimize the operation condition of loads.