Based on the dynamic compensation project of±2 Mvar DSTATCOM in Jiangxi Zhangshu Substation， by analyzing the local power quality performance， a harmonic and reactive power synchronous compensation method is proposed aiming at minimizing the compensation capacity. A frequency dividing coordinated control method for DSTATCOM on the basis of limit values judgment is presented and validated by detailed simulation. The compensation priority between harmonic and reactive power is confirmed by limit values judgment and the theory of instantaneous reactive power is used to detect the reference current. The frequency dividing control of harmonic and fundamental wave is realized by the integration of DC voltage PI control algorithm and incremental iteration approach of compensated current based on generalized integrator. The proposed method has strong applicability and is especially suitable for the use in the hybrid compensation system with limited compensation capacity in different working conditions. It helps to improve the DSTATCOM performance/price ratio， and thus widen its applications.