In the past decade, there has been a significant increase in the use of power electronic components in the design of household and industrial equipment. The use of power electronic based renewable energy resources, electric vehicles and other residential nonlinear loads may result in significant increases in injection levels of harmonics across a power system. Hence, it is important for utility companies to ascertain the exact harmonic levels present in terms of the amplitude and phase of each harmonic order. This paper provides a mathematical basis for distribution system state-space equations to formulate an iterative observer, which can simultaneously estimate harmonics present in a number of measurements taken from the power system. The method not only improves the computation time and provides real-time data for harmonic monitoring, but also performs wide area harmonic estimation for harmonic observability. Simulations and comparisons are provided to illustrate the performance of the proposed method against that obtained using a Kalman filter and fast Fourier transform (FFT). A number of scenarios such as measurement noise and change in amplitude of harmonic injections are simulated to verify the accuracy of the proposed approach and the results are included.