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The protection strategies in distribution systems are normally designed on the premise of unidirectional power flow towards the consumers. While integrating a DG in the main grid, possibility of creation of a power island subsists, thereby posing considerable risk to the safety of the equipment and also the associated personnel. Such a situation, known as islanding of grid, makes the DG as the sole power generation resource, supplying the associated loads, even when it remains disconnected from the main utility grid. Hence, all DGs need to utilize islanding detection techniques, while taking into account the power quality and safety issues. Any islanding detection strategy must respond quickly to an islanding condition; it must quickly revert to the steady-state after an islanding situation. A new Gauss-Newton algorithm is used here, for islanding detection in a photovoltaic system using the passive detection techniques. The proposed approach utilizes harmonic amplification factors and the absolute value of rate-of-change-of-negative sequence voltage for islanding detection, which exhibits meliorated reliability and robustness when compared with some of the existing islanding detection schemes. A novel Fuzzy control scheme is also used in this paper, which is employed for inverter control based on the constant active and reactive power concept. The controller's performance is compared with the more prevalent PI controller.