A power supply system, a converter, and a circulating current suppression method of the converter. The power supply system includes at least two converters that are coupled between a direct current power supply and an alternating current grid. Each converter obtains target output reactive power when an output current of the converter starts to increase from an initial current, obtains a reactive power compensation parameter based on the three-phase output voltages. Further, each converter obtains compensated output reactive power of the converter based on the reactive power compensation parameter and adjusts actual output reactive power of the converter based on the target output reactive power and the compensated output reactive power, so that an absolute value of a difference between common-mode output voltages of any two of the at least two adjusted converters is less than a difference threshold.