The concept of microgrid can integrate large amounts of Distributed Generations (DG) into power system and provide higher reliability, energy security and surety to critical loads. A Virtual Droop Control (VDC) method is proposed for the power management and voltage and frequency regulation and has been applied to the Fort Sill microgrid. The state space models for the microgrid components and systems have been developed. The dynamic characteristics of the sources, distribution lines and controls have been integrated in the developed state space model. The stability analysis has been performed in various scenarios.