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The growing environmental concern and various benefits of distributed generation (DG) have resulted in significant penetration of DG in many distribution systems worldwide. One of the major expected benefits of DG is the improvement in the reliability of power supply by supplying load during power outage by operating in an island mode. However, there are many challenges to overcome before islanding operation of a distribution system with DG can become a viable solution in future. This paper reviews some of the major challenges with islanding operation and explores some possible solutions to overcome those challenges.