This paper discusses the stability issues of the permanent magnetic synchronous generator (PMSG)-based direct driven wind energy conversion system (WECS) and presents a torque compensation strategy to improve the system stability. The stability analysis shows that the drive train dynamics can significantly affect the system stability by introducing a low-frequency oscillatory mode and the stability margin can be enlarged with the slower generator torque control loop or the reduced power converter response. The torque compensation strategy contains a feed-forward compensator in the torque control loop, which is formulated based on the dc current injected into the dc link capacitor of the converters. With such compensation, the oscillatory mode is effectively suppressed and the stability of the WECS is improved. The simulation results verify the theoretical analysis as well as the small-signal and transient performance of the strategy.