Control delay significantly affects the performance of distribution static synchronous compensator (D-STATCOM) in harmonic suppression and reactive power compensation. To overcome the drawback of the conventional control method, which has long compensation delay and low compensation accuracy, a novel control strategy based on software optimization is proposed. Software flow is adjusted based on the analysis of the reference compensation currents. It shortens the calculation delay of harmonics and reactive power compensation reference current, so compensation delay occurs less and compensation accuracy of harmonic suppression and reactive power compensation is improved. Results obtained by D-STATCOM simulations system built in Matlab/Simulink and prototype experiment of a 10 kVA three-phase four-wire D-STATCOM show the validity and feasibility of the proposed strategy.