Within smart grids, end-users often seek to reduce electricity costs using a home energy management system, while the power utility aims to optimize the grid operation. This article proposes a novel three-level framework to tackle the contradictory nature of the objectives of end-user and distribution system operators (DSOs) by upward and downward flexibility provision. In addition, the proposed method designs a novel incentive program based on the flexibility provided by the end-users. Then, the aggregated flexibility is offered to the DSO. The model takes advantage of the local flexibility of home appliances to re-schedule their use based on the flexibility request from the DSO. The aggregator provides incentive programs based on the flexibility provided by the prosumers to reduce/shift energy consumption. The proposed methodology considers the alignment of the conflicting techno-economic objectives of the prosumers and system operators. The results show that our proposed strategy has increased the monetary benefits for prosumers for their flexibility services provided to the DSO compared to other scenarios. Moreover, the proposed method improves the voltage profiles and reduces the peak load and power losses by 20.8% and 24.6%, respectively, of the overall system.