Abstract The islanding capability of Microgrids (MGs), when a fault happens in the grid, is seen as one major driver in enhancing the reliable of MGs. However, the use of power electronic interfaces based-MGs faces some difficulties in maintaining stability in an islanding mode due to the low capacity of installed DGs as well as the low speed response of MGs to any load changes. In fact, the lack of availability of spinning reserves makes fast response to load changes, as well as balancing between power generation and load demand difficult. This leads to deviation in voltage and frequency from their (pre-determined) permitted values. In this paper, a new MG’s topology along with a novel control strategy is proposed for stabilizing MGs in different operation modes. Battery storage is used to address the slow response problem of micro sources (MSs) to load changes, and to balance load demands and power generation in the islanding mode of MGs. A droop control idea is adopted in the lowest level of a hierarchy controller to enhance cooperation between power electronic inverters, and to improve load dispatch and voltage regulation. The voltage variation of the MG’s main bus is considered as a load change criterion, instead of the output power of converters, to increase the response speed of the control system. The effectiveness of the proposed control strategy is assessed using MATLA/SIMULINK. It is shown that the proposed control strategy improves the operation of MGs in grid connected and islanding modes where soft transient between these two modes are achieved.