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This paper proposes a smooth transition control strategy for voltage source inverters between standalone (SA) and grid connected (GC) modes of operation. In GC mode, the amount of power exchanged with the utility grid (UG) is controlled by regulating the phase currents. In the SA mode, the load voltage is regulated by the inverter with its phase dictated by the inverter control. An instant switching between SA and GC operations that will ensure continuous output power requires continuation in the phase of the system voltage. The trapezoidal, sinusoidal and staircase frequency change techniques have been analyzed to find out the optimum condition for which the total harmonic distortion (THD) become lower. We have developed a smooth frequency change technique which provides lower THD on the voltage waveforms compared to the other techniques. The new algorithm has been implemented on a 5kW single phase utility interactive inverter having the standalone operation capability.