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This paper discusses a new paradigm of real-time simulation of power systems in which equipment can be interfaced with a real-time digital simulator. In this scheme, one part of a power system can be simulated by using a real-time simulator, while the other part is implemented as a physical system. The only interface of the physical system with the computer-based simulator is through data-acquisition system. The physical system is driven by a voltage-source converter (VSC) that mimics the power system simulated in the real-time simulator. In this paper, the VSC operates in a voltage-control mode to track the point of common coupling voltage signal supplied by the digital simulator. This type of splitting a network in two parts and running a real-time simulation with a physical system in parallel is called a power network in loop here. This opens up the possibility of the study of interconnection of one or several distributed generators to a complex power network. The proposed implementation is verified through simulation studies using PSCAD/EMTDC and through hardware implementation on a TMS320F2812 DSP.