In this paper, the main circuit structure and modulation method of three level static var generator(SVG) is studied. Output harmonic current and ripple current of three-level SVG is analyzed and the formula of output current of three-level inverter is given by use of double Fourier tools. Through the calculation of the output ripple current , it is known that the inductance of the inverter side needed for a three-level SVG is only 2/3 of that for a two-level SVG to achieve the same current ripple. A design method for three-level static var generator (SVG) is proposed based on the reactive power compensation ability, harmonic suppression requirements of the equipment and the characteristics of the output current of the three-level SVG. Some parameters are designed for better filtering effect with relatively small inductance under the premise of reactive power compensation ability meeting requirements. Finally, the feasibility of the proposed design method is demonstrated by simulation and experiment.