To provide electric utility service of desired quality at the lowest possible cost, voltage drop and power loss reduction is crucial for distribution network. Distribution systems with Distributed Energy Resources (DER) have shown an enormous potential for power loss and voltage drop reduction. This paper investigates existing islanding detection techniques for feeder performance and proposes a new islanding detection algorithm (NIDA) for node voltage profile improvement and power loss reduction in the distribution network. The NIDA has been validated with three case studies. It has been investigated for its capabilities to improve the feeder performance in electric distribution system. The proposed algorithm outperforms the conventional approaches, which have many limitations to detect the islanding operation. The non-uniform distribution of electric loads, unity power factor, complexities in the design of control interface and functioning of the system in multi-DER environment are the most common obstacles in implementation of existing islanding detection techniques. NIDA is capable of handling the above mentioned complexities. The simulation results show that NIDA can detect islanding formation during the fault condition. The DER(s) provide uninterruptible power supply to sensitive load in the island, maintaining the nodes voltage and the power loss within the permissible limits. (V) 2010 Elsevier Ltd. All rights reserved.