Islanding operation of distribution systems with distributed generations (DG) is becoming a viable option for economical and technical reasons. However, there are various issues to be resolved before it can be a reality. One of the main issues is control of the DG. Control strategies, that may work fine while a DG is connected to a grid, might not work as desired while it is islanded and vise versa. This paper presents a strategy to operate distribution systems with a small gas turbine generator (GTG), which is capable of supplying local loads, in both islanding and grid connected conditions. Separate strategies are used to control the GTG while it is connected to the grid and while it is islanded. Switching between the control strategies is achieved through a state detection algorithm that includes islanding and grid re-connection detections. An existing islanding detection technique has been used and a grid re-connection detection algorithm has been developed. Simulation results show that the proposed method is effective in operating GTG optimally while it is either connected to the grid or islanded.