This paper intends to investigate the operation of a proton exchange membrane fuel cell system (PEMFC) under stand alone and grid connected operation mode when it is subjected to dynamic disturbance at the point of common coupling (PCC) in a distributed generation (DG) system. Monitoring of critical parameters in the system such as active power delivered by the system, PCC side frequency, anode channel pressure of PEMFC are the main parameters of interest. It is inferred that capability of the controller for voltage source inverter (VSI) used as an interfacing medium between the PEMFC system and PCC is critical for proper functioning of the fuel cell system as a whole. The critical aspects required for functioning of the system under both the modes, viz. stand alone and grid connected are brought out via simulation platform.