Small dc-link drive systems, built with film capacitors in the dc-link, present a new trend in many industrial applications and are obtaining increasing interests. It has the advantages of longer lifetime and the possibility to achieve a more compact design of the capacitor bank, especially at medium and high power rates. However, it could exhibit instability problems, mainly in the form of oscillations. The unexpected oscillation may result in overvoltage and shorten the lifetime of the power devices and the dc-link capacitors; increase the total harmonic distortion and also the partially weighted harmonic distortion of the grid supply current. Therefore, active damping methods are usually needed in order to stabilize such drive systems. This paper first analyzes the system characteristics and the principles of existing active damping methods. Then, a new voltage modulation based method named as “virtual positive impedance” method is introduced to guarantee the dc-link stability. This new approach is simple to apply and its implementation does not require the knowledge of system parameters and machine operating conditions. The proposed method is analyzed in details and verified by experiments.