This paper presents a design of microgrid (MG) with enhanced dynamic performance. Distributed energy resources (DER) are widely used in MGs to match the various load types and profiles. DERs include solar PV cells, wind energy sources, fuel cells, batteries, micro gas-engines and storage elements. MG will include AC/DC circuits, developed power electronics devices, inverters and power electronic controllers. A novel modulated power filters (MPF) device will be applied in MG design. Enhanced bacterial foraging optimization (EBFO) will be proposed to optimize and set the MPF parameters to enhance and tune the MG dynamic response. Recent dynamic control is applied to minimize the harmonic reference content. EBFO will adapt the gains of MPF dynamic control. The present research achieves an enhancement of MG dynamic performance, in addition to ensuring improvements in the power factor, bus voltage profile and power quality. MG operation will be evaluated by the dynamic response to be fine-tuned by MPF based on EBFO. Digital simulations have validated the results to show the effectiveness and efficient improvement by the proposed strategy.