For an islanded microgrid (MG) to work reliably, it is essential to manage the control of distributed energy resources, including generation and storage units, as well as loads, in a coordinated manner. In islanded microgrids, the safe energy storage limits must be accounted for coordination to avoid rapid damage or degradation to the storage units. In this paper, a novel control method is introduced to coordinate distributed generation (DG) and energy storage systems (ESS) in an islanded MG to enhance penetration and complete exploitation of DGs and ESSs and maintain balanced state of charge (SoC). A decentralized modified droop function (MDF) is suggested to share power and to control voltage and frequency without communication link. This controller uses virtual impedance to separate active and reactive power in the primary level control loop. Moreover, based on the ESS's charge state and its control as a frequency control support system, the proposed controller enables DGs to operate in both voltage and frequency control mode (VFCM) and active power control mode (APCM) to avoid overcharging. Likewise, to prevent from over discharging and maintain the frequency within permissible range, a new load shedding strategy is implemented to minimize the cycles of load connection and disconnection. The validation and effectiveness of the proposed control system are demonstrated by simulation results.