Abstract: The micro-grids are interconnection of renewable resources available at distribution side .Micro -grids can be operated in three different ways grid connected mode, autonomous mode and micro generation mode .The battery system is connected in DC link for supplying real power in the micro-grid .Quality of power supply has become an important issue with the increasing demand of DG system either connected to the conventional grid, smart grid or micro grid. Most of the pollution issues created in power systems are due to the non-linear characteristics and fast switching of power electronic devices which introduce harmonic in the line voltage and current .To eliminate the power quality issues from the distribution system it is essential to improve the reliability of the system. The Unified Power Quality Conditioner (UPQC) is used to to improve the real power by improving the quality of supply during the interconnected and islanded mode. Here UPQC is connected with micro-grid to improve the power quality and reduce the oscillations when the mode of the connection changes .The new control strategy is used for the integration and control of Unified Power Quality Conditioner in distribution generation based micro-grid system.