Increasing the power transfer across the existing power transmission lines and compensating for the voltage drops across these lines are two major challenges which will have great effects on the existing power networks and on the construction of new transmission lines.The Instantaneous Voltage Controller (IVC), the theory of which was presented in [1, 2, 3, 4], was initially operated on Current Source Inverter (CSI) principle to modulate the transmission line reactance. Modulation of the transmission line reactance has great effects on controlling the power flow across the power transmission lines and subsequently on the stability of power transfer and on voltage drop across the power lines. This paper investigates the operation of IVC as Voltage Drop Compensator (VDC) for power transmission lines based on Voltage Source Inverter (VSI) instead of CSI. The voltage drop compensation presented in this paper is based on switching the VSI to act on the voltage error between the load voltage and a sinusoidal reference voltage. The voltage on the load is maintained equal to the reference sinusoidal voltage by inclusion a feedback from the voltage error into the power module capacitor. The voltage instability associated with increased load demand caused by inability of power systems to meet demand for reactive power [5] can also be solved using Voltage Drop compensation. The computer simulation of this design shows that the VDC is effective in preventing the voltage instability by reducing the inductive reactance of the line and by that allowing the transfer of more active reactive power across the line.