With conventional droop control, parallel operation of distributed generations (DG) in microgrid would lead to unbalanced power sharing. In this paper, inherent limitation of conventional droop control is analyzed. Analysis results show that different converter output impedance and line impedance make the power sharing unbalanced. In order to weaken or eliminate impedance difference from point of common coupling (PCC) to DGs, virtual impedance is introduced. By the introduction of designed virtual impedance, a novel droop control strategy with impedance compensation is proposed in this paper. Simulation results are presented from a two converters parallel-connected microgrid, showing the effectiveness of the droop control with impedance compensation. Simulation results show that DGs with proposed approach can allocate the power equally, and work stably in grid-connected mode, island mode and progress of reconnection to grid.