The concept of generating electricity from renewable sources has been developed to solve the problems raised by environmental pollution and diminishing fossil fuel resources. Integration of clean renewable generation into existing electrical systems has been proven to benefit both power system operators and customers. However, a number of technical and economic challenges still exist with regards to effective integration and optimal utilization of such sources. One of the issues much debated recently is the provision for islanded operation in distribution networks utilizing the locally available generation. There are many obstacles and challenges concerning technical, economic and regulatory aspects of islanded operation which attract a significant amount of research worldwide. This review paper covers the stateof-the-art in research on islanded systems, specifically concerning: generation control, islanding detection, protection, and other functions such as power-sharing and black start capability.