In microgrid distribution generation (DG) sources are integrated parallelly for the economic and efficient operation of a power system. This integration of DG sources may cause many challenges in a microgrid. The islanding condition is termed a condition in which the DG sources in the microgrid continue to power the load even when the grid is cut off. This islanding situation must be identified as soon as possible to avoid the collapse of the microgrid. This work presents the hybrid islanding detection technique. This technique consists of both active and parametric estimation methods such as slip mode shift frequency (SMS) and exact signal parametric rotational invariance technique (ESPRIT), respectively. This technique will easily distinguish between islanding and non-islanding events even under very low power perturbations. The proposed method also has no power quality impact. The proposed method is tested with UL741 standard test conditions.