The paper presents a linear-quadratic current controller with damped oscillatory terms designed for three-phase grid-tie voltage source converters used in SMES systems and operated under distorted grid voltage conditions. Special emphasis is placed on a synthesis of an anti-windup mechanism to prevent wind-up derived from the oscillatory terms by the use of a new active damping loop based on a simple moving average method. As a consequence, the current feedback gain may be increased without unwanted overshoot and overruns, and performance of the system can be improved.