Nowadays, Distributed Generation (DG) is the most effective technique for the generation of onsite power through renewable energy sources. The energy coming from renewable sources is connected to the common point of the distribution system by using power-conditioning systems to increase reliability and cost minimization. The successful integration of distribution generation in the distribution system relies on quality power. The power quality of the distribution system is proliferated due to the existence of non-linear power-electronic devices and the sudden switching of loads. Over the classical compensation techniques, the custom-power devices play a key role in the distribution system for compensation of power-quality issues. Among various custom-power devices, the unified-power quality compensator fulfils the high capability for mitigation of all voltage and current issues by using superior control schemes. A multifunctional-UPQC has been proposed for distribution generation and power-quality enhancement in a distribution system in this work. It reduces the usage of additional power-conditioning devices and control schemes. The performance of the proposed MF-UPQC is investigated in both DG interface and PQ enhancement using MATLAB/Simulink software. The simulation results are also presented in detail.