The electricity sector is undergoing an evolution that demands the development of a network model with a high level of intelligence, known as a Smart Grid. One of the factors accelerating these changes is the development and implementation of renewable energy. In particular, increased photovoltaic generation can affect the network’s stability. One line of action is to provide inverters with a management capacity that enables them to act upon the grid in order to compensate for these problems. This paper describes the design and development of a prototype embedded system able to integrate with a photovoltaic inverter and provide it with multifunctional ability in order to analyze power quality and operate with protection. The most important subsystems of this prototype are described, indicating their operating fundamentals. This prototype has been tested with class A protocols according to IEC 61000-4-30 and IEC 62586-2. Tests have also been carried out to validate the response time in generating orders and alarm signals for protections. The highlights of these experimental results are discussed. Some descriptive aspects of the integration of the prototype in an experimental smart inverter are also commented upon.