This paper presents a nonlinear-controller design approach for ultracapacitor-based energy storage systems (UCESSs) for supplying active and reactive power in grid-connected power system applications. The controller is designed based on the dynamical model of UCESSs where the model is developed from the electrical equivalent circuit of the ultracapacitor (UC) connected to the grid through a voltage source converter (VSC). The nonlinear controller is designed based on the partial feedback linearization with an aim of controlling active and reactive power injected into the grid through the regulation of the respective currents. The stability analysis of the internal dynamics of UCESSs is also investigated in this paper as the controller cannot be implemented if these internal dynamics are unstable. The performance of the proposed controller is evaluated on a grid connected UC system and the simulation results show the superior performance of the proposed controller as compared to a finely-Tuned PI controller.