The power flow calculation is an important analysis tool for the power system. The essence of the traditional power flow algorithm is to solve a set of non-linear power flow equations. If initial conditions are not properly set, it may occur convergence issues. On the other hand, as more and more power electronic devices are connected into the power grid, the traditional algorithm becomes unavailable due to the diverse operation characteristics of these devices. To solve the above issues, this paper proposes a time domain iteration (TDI) based power flow algorithm for the power electronics dominated power system, and takes the microgrid system as an example to analyze. Firstly, the proposed TDI concept is introduced, which uses time domain deduction instead of equation calculation in the power flow calculation, so that convergence issues can be avoided. Secondly, the operation characteristics of power electronic based distributed generation (DG) units are analyzed, with the corresponding DG unit, network and load models established. After this, the iteration process is presented: the DG unit models output voltage or current to the network, and receive feedback voltage or current from the latter to generate the output for the next iteration. The output generation link is independent and edited refer to the DG control strategy. In theory, any strategy can be edited into this link, making the proposed power flow algorithm more flexible. Finally, the algorithm is verified through simulation results from a 38-bus power system containing droop-controlled DG units.