This thesis is concerned with the effect of line parameters and its length on the dynamic performance of micro-grids (MG) with decentralized control strategy. Power systems and particularly distribution networks are facing rapid penetration of Distributed Generation (DG) and Distributed Resources (DR). DG has many potential advantages such as increased efficiency through combined heat and power (CHP), increased reliability due to the proximity of loads and sources, reduction in new transmission line expenses and the capability of employing renewable energy resources in various scales. Despite these advantages, high penetration of DG into existing distribution networks may result in many new problems which need to be investigated. Closely related to the concept of DG is the concept of Micro-grid (MG). A cluster of loads and DG units or micro-sources (MS) operating as a single controllable system that provides both power and heat to its local area is called a micro-grid (MG). MGs could adopt centralized or decentralized control strategy. In centralized control strategy, a control centre issue and coordinate the operation of different MSs. In decentralized control strategy, each MS has its own control system which senses only local parameters. Decentralized strategy has proved to be more reliable as the system is not dependent on a high speed communication media. The area in which a MG is formed could be as small as a building or as large as a vast remote area. In this regard, line length could increase when micro-sources (MS) and loads are geographically are located far from each other in a micro-grid. Line length increase could affect the dynamic behavior of a MG. Furthermore, line parameters like its inductance, resistance and capacitance can also has some influence on a MG dynamic behavior. To investigate these effects, this paper first presents the complete small signal modeling of a MG. In this respect, all MG components are precisely modeled and consequently the complete small-signal model is obtained around the operating point. A customized load flow algorithm is derived and used to determine the operating point corresponding to each operating condition. The analytical expressions that govern the sensitivity of power transfer between two ac sources are derived. Analysis shows that the dynamic performance is deteriorated when the line length increases. Specifically, the system dynamic response becomes slow after certain line length, and eventually instability appears after longer length. Analytical results are verified using linearized small-signal model of a real-world micro-grid. Time domain simulations are also used for the validation of results. The effect of resistance and inductance of the line on the dynamic stability is also investigated. Keywords: Decentralized control strategy, distributed genertion, microgrid, small signal model