This paper presents an enhanced power sharing scheme (EPSS) for parallelly connected distributed generators (DGs) in an islanded microgrid (MG) using a constant switching frequency‐model predictive control (CSF‐MPC). Unlike conventional droop control, wherein only accurate real power sharing among DGs is possible, the EPSS enables accurate sharing of reactive and harmonic powers even under mismatched line impedances. Additionally, the voltage unbalance and distortion at the point of common coupling (PCC) are mitigated. The EPSS is implemented using a reference voltage that consists of (1) the fundamental droop control; (2) the virtual impedance control; (3) the unbalance compensation control; and (4) the harmonic compensation control. The performance of the EPSS is tested on a MG consisting of two DGs of both similar and dissimilar capacities under a step changes in loads. The EPSS is implemented using CSF‐MPC, which offers superior performance compared with conventional proportional plus integral and proportional resonant controllers. The simulation and hardware‐in‐loop results confirm the effectiveness of the EPSS in addressing power sharing issues and mitigating both distortion and unbalance of PCC voltage.