With the wide application of nonlinear loads, the disadvantages of the method of decentralized harmonic suppression at the terminal are gradually revealed. To achieve the configuration of active power filter in the middleandsmall sized grid, the isolated niche particle swarm optimization is adopted in this paper. Firstly, the configuration model of APF is built, the objective of which is to minimize the rms of node THD. Besides, the constraint conditions are executed by the penalty function. The modified algorithm has a better performance for global and local optimization and avoids the problem falling into local optima. The steps of allocation are elaborated, and the effectiveness of the proposed method is proved by the examples, the method can optimize the location and capacity of APF synchronously and achieve the power quality improvement for single or multi harmonics sources system. As a result, the THD of node voltage is less than 4% and the harmonic additional losses reduced by more than 90% after the improvement.