Significant penetration of distributed generation in many distribution systems has opened an option of operating distribution systems in island mode for economical and technical reasons. However, balancing frequency of the islanded system is still an issue to be solved, especially when the demand exceeds the generation in the power island. This paper presents a strategy to shed an optimal number of loads in the island to stabilize the frequency. The load shedding strategy is based on frequency information, rate of change of frequency, customers' willingness to pay, and loads histories. Different scenarios have been simulated with results showing that the proposed method is effective in shedding the optimal number of loads while stabilizing frequency.