Instability can occur when a parallel active power filter whose reference current is deduced based on load current detection is applied to compensate capacitive nonlinearity load. The root cause of instability is the mismatch and the mutual influence of input and output impedance in cascade system. The mathematical model of parallel active power filter which is applied to compensate capacitive nonlinearity load is primarily built for the problem in this paper, and the impedance characteristic of input and output part in cascade system is analyzed based on the Middlebrook impedance analysis theory, the root instability cause is discussed by the stability criterion in cascade system, finally, the simulation and experimental results validate the correctness of the theoretical analysis.