Renewable energy sources (RESs) are considered a crucial energy transformation to reduce carbon emissions, so more RESs are being integrated into contemporary power systems. Power electronic converters are extensively utilized to connect power grids with renewable generators to manage the fluctuations and unpredictability of these renewable energy sources. This paper introduces a multi-terminal multi-function inverter (MT-MF) designed for a battery energy storage system (BESS) to maintain the frequency stability of a hybrid microgrid (MG). The MG comprises a photovoltaic generation system, a diesel generator, BESS, and two loads: one constant load and the other variable, fed through a medium-voltage radial feeding system. An introduced approach involves utilizing a model predictive control controlled virtual synchronous generator (MPC-VSG) for BESS. This method offers inertia support during transient states and improves the dynamic characteristics of system frequency. In addition, it enables the connection of multiple batteries, provides individualized control for each, and supports the injection of reactive power into the MG. The required power from the BESS is shared between the two batteries using the low pass filter technique. The simulation outcomes affirm the proposed control strategy’s effectiveness and underscore the MT-MF inverter approach’s potential in integrating extensive RESs. This paper also explores how the proposed technique outperforms other methods in improving frequency stability.