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The power hardware-in-the-loop (PHIL) simulation has become a popular testing approach due to the flexibility it provides and the high-fidelity of its results. It is expected to be utilized as an advanced laboratory testing scheme to validate the grid support functions of distributed energy resources (DERs) because it can evaluate the interaction between the power system and DERs. Despite the strong demand to utilize the PHIL simulation for such testing, the literature that elaborates on the practical design of PHIL simulation based testing (hereafter called “PHIL testing”) environment including laboratory device setup, power system models, and test procedures is very limited. The simulation models, interfacing with the tested equipment, and data collection approaches are all different parameters that need to be fine-tuned for the successful execution of PHIL testing. It is vital for such successful test experiences to be shared to build universal knowledge around PHIL testing. In order to fill this knowledge gap, this paper presents such practical and essential techniques for the PHIL testing to share the knowledge for promotion of the PHIL simulation utilization. The development of PHIL testing environment to validate the smart inverter functions, i.e., volt-var function and frequency-watt function, is focused on in terms of laboratory setup, power system modeling, interfacing, and test procedure. The volt-var and frequency-watt functions of a 500 kW smart inverter of photovoltaic are validated on the basis of the presented techniques. Detailed test configurations, test procedures, and simulation models are presented along with obtained test results.