Meter encoding, as a side-effect-free scheme, has been proposed to detect false data injection (FDI) attacks without significantly affecting the operation of power systems. However, existing meter encoding schemes either require encoding lots of measurements from different buses to protect a substantial proportion of a power system or are unhidden from alert attackers. To address these issues, this paper proposes a smart inverter enabled meter encoding scheme for detecting FDI attacks in distribution system state estimation. The proposed scheme only encodes the measurements from the existing programmable smart inverters. Meanwhile, this scheme can protect all the downstream buses from the encoded inverter bus. Compared with existing schemes, the proposed scheme encodes fewer meters when protecting the same number of buses, which decreases the encoding cost. In addition, by following the physical power flow laws, the proposed scheme is hidden from alert attackers who can implement the state estimation-based bad data detection (BDD). Simulation results from the IEEE 69-bus distribution system demonstrate that the proposed scheme can mislead the attacker’s state estimation on all the downstream buses from the encoded bus without arousing the attacker’s suspicion. FDI attacks that are constructed based on the misled estimated state are very likely to trigger the defender’s BDD alarm.