This paper describes the development of a novel islanding detection method, which uses the signal cross-corelation scheme between the injected reactive current and the power frequency deviation. The existing method, which injects the reactive current of 2.5-5% to the rated current and detects the frequency deviation directly, brings about lowing the power quality due to the harmonic pollution. The proposed method eliminates the weak point of the existing method, because it injects the reactive current less than 1% to the rated current. The operational feasibility was verified through computer simulations with PSCAD/EMTDC software, and experimental works with a 10kVA hardware prototype. The proposed method can detect the islanding status effectively without lowing the power quality of interconnected distributed generation system.