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If sensitive loads are connected to the point of common coupling (PCC), compensation should be carried out in order to reduce PCC voltage harmonics. In this case, compensation is performed by the interface converters of distributed generation (DG) units. In this paper, a novel method is proposed for voltage harmonics compensation in islanded microgrids. The proposed method is capable of adjusting compensation percentage in proportion to the existing level of distortion at PCC. Also, this controller provides a proper sharing of compensation workload, considering the nominal capacity of DGs, which will improve the sharing of nonlinear load. Also, to decrease the asymmetry among phase impedances of microgrid, a novel structure is proposed to generate virtual impedance. At fundamental frequency, the proposed structure for the virtual impedance improves the control of the fundamental component of the power, and at harmonic frequencies, it acts to adaptively improve nonlinear load sharing among DG units. In the structures of the proposed harmonics compensator and the proposed virtual impedance, a self-tuning filter is used for separating the fundamental component from the harmonic components. This self-tuning filter decreases the number of the phase-locked loops. The simulation results in MATLAB/SIMULINK environment show the efficiency of the proposed approach in improving load sharing and decreasing voltage harmonics. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]