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Abstract: The full definition of power factor must include the phase relationship between the voltage and current (displacement factor) as well as the harmonic distortion (distortion factor). For simplicity, when the concept of power factor is first introduced, the displacement factor is the part of the power factor that is focused on. The power factor and the means to correct it, the distortion factor must also be included in any power factor calculations. Here we applied RETO with the help of Power factor injecting Pulse generator PI Controller we maintained the fluctuation at time of occurrences. To maintain the stable power flow the power generation, transmission, and distribution system, power quality is essential because of improving the electronic loads applications. Power quality is affected by voltage sags, swells, harmonics, etc. which will damage or produce failure in the load. The proposed work aims to reduce the previous effects and improve power quality along with Dynamic Voltage Restorer (DVR), which is implemented in this work to eliminate voltage sags, swells, and harmonics. A DVR is proposed based on inverter drop compensation to adjust the voltage and to meet the critical needs of power quality. In this system, the DVR-synchronized three-phase voltage in series is connected with the power supply step-up transformer with the appropriate amplitude and duration of discharge recovery power quality. Rational Energy Transformative Optimization (RETO) Algorithm has proposed to provide the suitable Pulse Width Modulation (PWM) to the Voltage Source Inverter (VSI), which generates and absorbs reactive power or actual power independently. DVR is a highly tuned output voltage waveform with high power quality with less harmonic compensation and mitigates voltage transients in the distribution system. The Performance of DVR is simulated under dynamic conditions with various parameters like steady-state error, Efficiency, Total Harmonics Distortion (THD) in the load. All the above-determined parameters are evaluated in MATLAB SIMULINK 2015a software.