Unbalanced voltage sags often occur during actual power grid operations, causing problem of excessing output peak current, which significantly affects the reliable operation of power grid. This paper first analyzes the mechanism of excessing peak current of grid-connected photovoltaic inverter under unbalanced voltage sags, then a reference current algorithm which takes output peak current into consideration is proposed, adding several adjusting parameters based on the existing reference current algorithm. The reference current algorithm can adjust peak current and power fluctuations. Based on the improved reference current algorithm, an active and reactive coordinate control strategy is proposed, the control strategy effectively solves the overcurrent problem under unbalanced voltage conditions, and expands the output active power of PV system. The simulation models in PSCAD/EMTDC are established to validate the proposed control strategy. This work is supported by National Natural Science Foundation of China (No. 51277069).