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This paper proposes a passive islanding detection algorithm that is based on a new index termed Zero-Sequence Impedance (ZSI). The ZSI is defined in the time-frequency domain as a means to reliably detect an islanding condition using measurements of voltage and current at the point of common coupling (PCC). The approach is applicable in distributed generation (DG) systems that use power electronic converters to connect to the electric power system (EPS) as well as distributed generators that interface directly to the EPS. The sensitivity of the new index has been assessed across a range of operating conditions and tested using records of off-line data.