The invention provides a virtual power plant distributed reactive compensation system and compensation method thereof. When a regional power grid to which the virtual power plant belongs happens a no-power vacancy, power dispatching center send a power reactive regulating variable to the virtual power plant according to the specific condition. A distributed reactive power compensator utilizes distributed optimal control strategy to coordinate the no-power vacancy of the regional power grid among distributed power supplies inside the virtual power plant, which makes the total amount of a reactive power be distributed in phase among all distributed power supplies inside the virtual power plant and finally makes the virtual power plant satisfy entirely a voltage performance index to be optimized. The virtual power plant distributed reactive compensation system and compensation method thereof has the advantages of meeting a need of the reactive power regulation of the regional power grid center and meanwhile achieving the optimum of the voltage performance index inside the virtual power plant.