For the past decades, there has been a rapid increase in the penetration of distributed generation (DG) units on the electrical grid. The DG units consist of renewable energy sources (RES), including photovoltaic, wind energy, fuel cells, and micro-turbines, which have the advantage of reducing pollutions, decreasing transmission power loss, providing flexible installation locations, and improving the utilization of renewable resources. Renewable energy sources are interfaced with the electrical grid, also termed as microgrids, using inverters. These interfaced inverters play a vital role in the microgrid performance when connected to the main electrical grid and operated as a stand-alone or islanded mode of operation. This thesis work demonstrates the hierarchical control strategy, consisting of primary and secondary control layers, for voltage and frequency control of microgrid operated in the islanded mode of operation. The primary control layer uses the droop control strategy adapted from the conventional electrical system to maintain accurate active power-sharing among multiple inverters connected in parallel. The droop control strategy is widely accepted as it is communication-free and easily implemented at decentralized control level. In addition, secondary control is implemented to restore the deviation in microgrid frequency and voltage magnitude, caused by the primary control level, to its nominal values. Furthermore, the proposed control strategy has been tested through simulation using MATLAB® & Simulink® software to understand the study on hierarchical droop-based control on the islanded microgrids. A MATLAB® Simulink® model consisting for two voltage source inverters (VSI) connected in parallel with a common load is implemented and the results are presented in this thesis. The model is then modified for further understanding of droop control strategy for islanded microgrids consisting of varying load demands, inverters with different droop coefficients and three inverters connected in parallel with a common load. This study helped to understand the relationship between inverter droop coefficients and their output power. The MATLAB® Simulink® models for different case studies and their results are included as a chapter in the work.