This thesis presents a control strategy to improve the transient performance of standalone microgrids with converter-based Distributed Generation (DG) units. Distribution networks are experiencing rapid penetration of Distributed Generation units into them. Such a scheme provides many benefits such as higher reliability, lower losses, transmission line expenses deferral and the possibility of integration of a variety of small generating units including renewable energy resources. Sometimes, a part of utility grid which consists of one or several DGs and local loads forms an autonomous system which is known as Microgrid (MG). In such scenario and in the absence of utility grid, DGs are responsible for maintaining voltage and frequency of the islanded MG within acceptable limits. Many DGs and energy resourcessuch as PV, fuel-cells, storage systems and microturbinesmust be interfaced to the ac utility grid by means of a static converter. TheseDGs inherently have a fast dynamic response due to the lack of any mass and inertia. On the other hand, other types of DGs such as diesel-generators have relatively slower dynamic response due to the presence of rotating mass of both diesel engine and synchronous generator. This difference in dynamic response of two types of DGs may sometimes become problematic. For example, in the case when a step load change occurs in a standalone MG, converter-based source naturally tends to respond faster and thus take up the majority of load during transients. This may result in several issues such as converter overload, unwanted oscillation or unacceptable voltage dips at DG terminals or other grid buses. In this thesis, the methods for alleviating the above mentioned problems are investigated. In doing so, the control structure of a diesel-generatorand a converter-based source in a standalone MG are modeled and their performance is evaluated. The transient performance of a MG after a step load change is studied using time-domain simulations. It is shown how a converter-based DG is overloaded due to its faster dynamic response. The performance of the system after adding a current limiter is studied. The drawbacks associated with a simple limiter are shown.A new structure is proposed to improve the performance of limiters added to the control structure. Any type of limiter will have negative impact on the performance of control system. Therefore, a control structure with no limiter is proposed to control inverter output current and prevent over currents. The proposed method has stable operation and prevents saturation of control signals, thus avoiding undesirable performance. Simulation results demonstrate the effectiveness of the proposed method. Keywords: Distributed Generation; Standalone microgrid; Converter-based DG, Synchronous generator DG; current limiter