In the process of accessing distributed power sources in microgrid, there will be serious coupling between active power and reactive power, which will lead to significant changes in the inverter outlet voltage and impedance and increase the circulating current phenomenon. The generation of circulating current will accelerate the aging of devices, reduce the inverter efficiency, and threaten the stable operation of the system. In this paper, the mechanism of circulating current generation is analysed, the basic characteristics of circulating current are studied, and an inverter parallel circulating current suppression strategy with adaptive virtual composite impedance and droop control dynamic adjustment algorithm is proposed. The virtual impedance setting can weaken the influence of line difference on system stability, make the system equivalent output impedance resistive, weaken the inductive device characteristics and reduce the circulating current amplitude; the adaptive droop algorithm implantation dynamically correlates the control power with the droop coefficient, enhance the power decoupling accuracy and weaken the circulating current influenced by power changes. The simulation platform and experimental setup established by the large‐scale simulation software PSCAD/EMTDC are used to study the basic scenarios of the inverter under two conditions of equal and unequal capacity, and the rationality of the proposed control strategy is tested.