In contrast to traditional centralized estimation methods, this letter proposes a distributed dynamic state estimation method for microgrids incorporating distributed energy resources. Specifically, distributed filter structure is designed in an interconnected way, where packet losses obviously occur between them. Then the error function is written in a compact form using the matrix property of the Kronecker product. Afterwards, it can be transformed into a linear matrix inequality. Finally, the local and neighboring gains for the distributed estimator are effectively computed after solving the convex optimization problem. Simulation result shows that the proposed method can well estimate the system state within 10 iterations.