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Islanding phenomenon is a problem for Distributed Generator (DG) based networks leading to troubles in voltage and frequency control and other power quality issues. This paper describes the development of a method based on Discrete Wavelet Transform (DWT), in order to detect islanding for DGs. This method detects the islanding state only by evaluating the terminal current of DGs. Hence, different types of current signal in the case of fault occurrence, load and capacitor switching and motor starting have been investigated. In order to increase the accuracy of the wavelet analysis, the proposed algorithm is executed for each type of current signals using different types of mother wavelets, decomposition levels, length of data window and moving size of window to decide on the best assumption of each parameter. The results of the study show that the proposed method can detect the islanding state within a time less than one third of a cycle with a good accuracy.