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This paper presents a microgrid paradigm with both DC and AC links, which may provide an effective way to integrate a heterogeneous set of small-size distributed energy resources into the existing electric power infrastructure. The collection of aggregated energy resource units at each level represents those distributed resources to the upper level as a single self-regulated entity (as a DC or AC, generator or load). At the top level, the collection of all distributed energy resources in the microgrid appears to the utility grid as indistinguishable from many other currently legitimate customer sites. Maintaining this profile relies on the flexibility of advanced power electronics that control the interfaces among distributed energy units, DC links, AC links, and the surrounding power system. This paper also discusses some major issues pertinent to behavioral functions and technical requirements of the power electronics interfaces and controls. A decoupled control framework is developed for the hybrid microgrid and the performances are evaluated.