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Microgrid with non-linear and unbalanced loads experiences power quality problems such high total harmonic distortion (THD) and unbalanced voltages. The paper proposes a compensation and control strategies to eliminate the influence of non-linear and unbalanced loads on microgrid and the utility grid that connected. Based on instantaneous power in d-q reference frame, the reference compensation current for voltage source converter (VSC) is generated using the difference between instantaneous currents at distribution network and load sides. Load sharing methods and control strategies for distributed generators under two operation modes of microgrids have been discussed. A back-to-back converter is applied to eliminate the unbalanced voltage disturbance to utility grid. The inverse droop control is proposed to achieve seamless transformation from one operating mode to another, and to automatically share load among DGs in the islanded mode. The simulation results obtained in the PSCAD/EMTDC software verify the effectiveness of the proposed control and compensation strategies.