The distribution system provides major opportunities for smart grid concepts. One way to approach distribution system problems is to rethinking our distribution system to include the integration of high levels of distributed energy resources, using microgrid concepts. Basic objectives are improved reliability, promote high penetration of renewable sources, dynamic islanding, and improved generation efficiencies through the use of waste heat. Managing significant levels of distributed energy resources (DERs) with a wide and dynamic set of resources and control points can become overwhelming. The best way to manage such a system is to break the distribution system down into small clusters or microgrids, with distributed optimizing controls coordinating multimicrogrids. The Consortium for Electric Reliability Technology Solutions (CERTSs) concept views clustered generation and associated loads as a grid resource or a “microgrid.” The clustered sources and loads can operate in parallel to the grid or as an island. This grid resource can disconnect from the utility during events (i.e., faults, voltage collapses), but may also intentionally disconnect when the quality of power from the grid falls below certain standards. This paper focuses on DER-based distribution, the basics of microgrids, possibility of smart distribution systems using coupled microgrid and the current state of autonomous microgrid technology.