Many distribution systems nowadays have significant penetration of distributed generation (DG)and thus, islanding operation of these distribution systems is becoming a viable option for economical and technical reasons. The DG should operate optimally during both grid-connected and island conditions, which can be achieved with change in operating strategy. Many islanding detection techniques have been developed but little work has been done to detect grid re-connection. This paper presents strategies to operate DG in grid connected and islanded modes and a new grid re-connection detection algorithm, which uses average rate of change off requency (Af5) and real power shift RPS), in the islanded mode. RPS will increase or decrease the power set point of the generator with increasing or decreasing system frequency, respectively. Simulation results show that the proposed method can operate the DG efficiently and is effective in detecting grid-reconnection.