In voltage-source converter systems, utilization of filter inductors with deep saturation characteristics is often advantageous because of the improved size, cost, and efficiency. However, with the use of conventional current regulation methods, the inductor saturation results in significant dynamic performance loss and poor steady-state current waveform quality. This paper proposes the saturation compensation with resistive decoupling (SCRD) method to overcome these performance issues. The method converts the nonlinear inductor of the plant to a fictitious linear inductor such that linear current regulators can perform satisfactorily. The steady-state and dynamic performances of SCRD are investigated in detail in comparison with other methods and advantageous performance attributes of SCRD are demonstrated on a 1.5-kW grid-connected system via simulations and laboratory experiments. In addition, identification of L-R parameters is performed, parameter sensitivity issues are addressed, and satisfactory performance is demonstrated.