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In this paper, a virtual-impedance-based fault current limiter (VI-FCL) is proposed for islanded microgrids comprised of multiple inverter interfaced distributed generators (DGs). Considering the fault current induced by high penetration of renewable energy sources, FCLs are employed to suppress the fault current and the subsequent oscillation and even instability in the modern distribution network with microgrids. In this paper, rather than involving extra hardware equipment, the functionality of FCL is achieved in the control diagram of DG inverters by employing additional virtual impedance control loops. The proposed VI-FCL features flexible and low-cost implementation and can effectively suppress the fault current and the oscillation in the following fault restoration process in AC microgrids. The systematic model of the inverter dominated AC microgrid is derived, and the stability analysis in consideration of VI-FCLs …