Abstract: Abstract: Nowadays, more and more DG (distributed generation) and renewable energy sources, e.g. solar, wind, are promoted in vast rural areas. Several DG units can form an islanded microgrid together with storage units and common loads, which can achieve optimal management of electric energy and then better solve the power shortage problem in remote rural areas without electricity. The droop control is always used to realize power sharing in islanded microgrid because of no external communication and high reliability. Though the traditional frequency/voltage droop control technique shares common active loads, its reactive power sharing strategy is plant parameter dependent and does not realize reasonable reactive power sharing. Additionally, PCC (point of common coupling) voltage amplitude drop is serious because of reactive load increasing and inherent characteristics of the traditional droop control. In order to solve the problem of unreasonable reactive power sharing of islanded low-voltage microgrid and serious PCC voltage amplitude drop, a detailed analysis of reactive power sharing mechanism of the traditional droop control is carried out. By the analysis, the inherent limitation of the traditional droop control strategy is revealed and it is proved that the fundamental reason of unreasonable reactive power sharing is a transfer impendence mismatch. Based on the analysis, an improved reactive power sharing strategy is proposed for the microgrid working in islanded mode. Firstly, the proposed reactive power sharing strategy uses a control loop to introduce a virtual inductance at the output end of the DG unit in order to make a transfer impendence of low-voltage microgrid become inductive, which has only the active power and the reactive power decoupled and then meets the condition of realizing the proposed reactive power sharing strategy. Next the difference between the DG unit voltage amplitude at no load and PCC voltage amplitude is fed back to the traditional droop control in a certain way. The proposed reactive power sharing strategy can not only achieve reasonable reactive power sharing under the condition of transfer impendence mismatch, but also greatly improve serious PCC voltage amplitude drop which is caused by increasing reactive loads and the inherent characteristics of the traditional droop control. Through the small signal stability analysis of the proposed strategy, the stability conditions are revealed that are easy to meet in practice. Because the distance from the DG unit to the PCC is far, the acquisition of PCC voltage amplitude need communication, which undermines the advantage of local control of the traditional droop control. In order to keep the advantage of local control, the PCC voltage amplitude is replaced by the access point voltage amplitude of the DG unit, which leads to a reactive power sharing error. Quantitative analysis of the error in reactive power sharing has been carried out thoroughly. By the analysis, it is found that the error is acceptable in the project as long as certain conditions are satisfied. A simulation platform is made up of two parallel connected inverters and a common load. Various simulation results show that the proposed reactive power sharing strategy is very effective and does not interfere with active power sharing.