In order to design a Dynamic Voltage Restorer (DVR) having good, fast and stable compensation features, the DVR system model is built. Based on this block diagram model, the effect of different system parameters on the system performances including stability, voltage harmonics compensation capability, load adaptability and response time can be investigated and analyzed. The proportional gain in PI controller Kv and filtering capacitor feedback current gaina are the two dominant parameters on the DVR response time and stability, while the fundamental inverter gain Km is in more concern of the ride-through and compensation capability, and time constant t in PI controller has little effect on the system performance. In addition, these four system parameters also found to have contributions on the steady-state error, load adaptability and voltage harmonics compensation capability. After investigation of their distinct effects, a new set of system parameters is designed for simulation. Simulation results illustrate good system compensating features, which verifies the system parameter effect analyses. Finally, a guideline for selecting different system parameter values to obtain good compensation performances is presented.