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A coordinated control of distributed generators (DG) and distribution static compensator (DSTATCOM) in a microgrid is proposed in this paper. With high penetration of distributed sources and single-phase operation of the system, voltage unbalance can often go beyond the acceptable limit. With the feeders geographically spread out, it is not always possible to achieve reactive compensation at optimum location with the three-phase devices. In this paper, a simple control strategy for DSTATCOM with communication in loop is proposed. The proposed reactive compensation technique is based on the voltage sag and the power flow in the line. The power flow and the voltage at different locations of the feeders are communicated to the DSTATCOM to modulate the reactive compensation. The single-phase DSTATCOM compensates for the reactive power deficiency in the phase while the DGs supply “maximum available active power.” During reactive power limit of the DG, the “maximum available active power” is fixed to a value lower than maximum active power to increase reactive power injection capability of the DGs. A primary control loop based on local measurement in the DSTATCOM always ensures a part of reactive compensation in case of communication failure. It is shown that the proposed method can always ensure to achieve acceptable voltage regulation. The data traffic analysis of the communication scheme and closed-loop simulation of power network and communication network are presented to validate the proposed method.