In this thesis, a novel frequency/ voltage droop scheme for parallel operation of voltage source converters (VSCs) in an islanded multibus microgrid is proposed. This approach leads to reduction in the reactive power sharing dependence on real power control and system parameters such as mismatched connecting and line impedances. The proposed strategy improves performance of the microgrid in view of reactive power sharing, voltage regulation and dynamic and transient responses. Two indices are introduced for evaluating the scheme performance. The indices are used as objective functions in two independent optimization problems that are employed to determine parameters of the scheme. Key Words Inverter-based microgrid, frequency/ voltage droop method, voltage regulation, active and reactive power sharing.