Although the capability of multifunctional grid-tied inverters (MFGTI) to compensate the voltage-based power quality is limited, more attention has been paid to their ability to improve power quality for effective use of renewable energy sources (RES) and grid resources even in poor power quality conditions. This paper proposes a MFGTI to compensate all power quality issues based on voltage, current and harmonic distortions caused by load and grid as a promising solution in microgrids. In this scheme, the proposed MFGTI can be connected to the grid in series or parallel via bidirectional switches to react to the disturbances occurring across the grid. The necessary compensation of current and voltage are mathematically extracted according to the grid and load situation to regulate the voltage. Also, in the proposed method, compensation strategies, control scheme and transients in the MFGTI are presented and in addition to compensate the balanced and unbalanced grid voltage disturbances, grid current is also compensated and harmonic distortions of PCC voltage and current is also reduced as much as possible under the allowable value. The simulation results to confirm the proposed method including the compensation of unbalanced voltage sag/swell, harmonics and interruption are performed in Simulink/MATLAB environment.