This paper presents a novel and efficient control scheme for unified power quality conditioner (UPQC) based on three-level neutral point clamped (NPC) inverter using fuzzy logic techniques. The proposed UPQC is capable of mitigating source current harmonics and compensate all voltage disturbances such as voltage sags, swells, unbalances and harmonics. It is designed by the integration of series and shunt active filters (AFs) sharing a common DC bus capacitor. The DC voltage is maintained constant using proportional integral voltage controller. The synchronous reference frame (SRF) theory is used to get the reference signals for shunt active power filters (APFs) and the power reactive theory (p-q theory) for series APFs. The shunt and series APF reference signals derived from the control algorithm and sensed signals are injected in two controllers to generate switching signals. To improve the UPQC capability, fuzzy logic techniques are introduced to control the series APF. The performances of the proposed UPQC system are evaluated in terms of power factor correction, mitigation of voltage or current harmonics and all other voltage disturbances compensation using Matlab-Simulink software and SimPowerSystem toolbox. The simulation results illustrate the performance of the proposed UPQC at the common connection point of the nonlinear load to improve the power energy quality.