In this paper, a complete control scheme is developed for an inverter-based distributed generation (IBDG) unit to produce high quality AC voltages in unit terminals. The unit uses a three-phase, four-leg inverter. The control scheme includes a feed-forward current control path and two nested loops, the outer loop for regulating the DG output voltage and the inner one for controlling the inverter current. Proportional-Resonant (PR) controllers are used in the voltage loop to track a sinusoidal reference voltage and eliminate low-order voltage harmonics. The inner current loop is used for over-load protection of the inverter, and improvement of the control system response. The current controller is designed by the state feedback method. The feed forward current control path is used to reduce impacts of load disturbances on the IBDG output voltages. Regarding the role of the inverter output filter and controllers in voltage quality, the filter design procedure is reviewed, the approach to choosing the controllers parameters is explained, and stability conditions of the system are investigated. The performance of an IBDG that supplies a local load is studied under unbalanced and nonlinear loading, and sudden changes in the load amount and voltage amplitude.