This paper presents the three-phase custom power active transformer (CPAT), characterized by the integration of power electronics in a transformer to facilitate grid services. Such integration enables step-up/step-down transformation between primary and secondary as well as shunt and series compensation services to the power system through a single transformer. The CPAT can empower the grid with flexible ac transmission system and power quality services such as power flow control, reactive power compensation, active filter, and voltage regulation through a single monolithic transformer. In this paper, designs of the three-phase CPAT are realized and analyzed based on their equivalent magnetic circuit as well as their structure requirements and constraints. Simulation analysis of the three-phase CPAT clarifies its capability to actively regulate power flow between the primary and secondary windings as well as achieve grid harmonic current compensation. Moreover, through real-time simulations and an experimental prototype, the merits and performance of the three-phase CPAT were further validated.