In this paper, a multifunctional three-phase grid-connected single-stage solar photovoltaic (SPV) system is presented using an intelligent adaptive control technique. The system configures a SPV array, VSC (Voltage Source Converter), interfacing inductors, ripple filter and three-phase grid connected nonlinear loads. The system is multifunctional as it provides functions of two different modes: 1) It acts as a SPV energy conversion system supplying active power to the loads and grid as well as a DSTATCOM (Distributed Static Compensator), and 2) It acts as a DSTATCOM alone, when SPV generation is unavailable and mitigates several power quality issues such as harmonics attenuation, voltage fluctuations and flickers, reactive power compensation, power factor correction (PFC) and load balancing. It uses a single-stage converter topology with variable step-size least mean fourth (VSS-LMF) derived adaptive control technique for VSC switching incorporating perturb and observe (P&O) method for MPPT (Maximum Power Point Tracking). The performance of the presented system is validated through experimental results obtained on the developed laboratory prototype.