In the present times, distributed generation has acquired lots of importance in the power industry. The consequences on the power system develop further significance with the increase in the contribution of distribution energy resources to the electric power production. Nowadays islanding has become a major issue with increase in use of Distributed Generators (DG) in power system. When a part of distributed system becomes electrically separated from the rest of the system and the DG(s) in the isolated portion continues to power the local loads, then this condition is termed as Islanding condition. In this paper, for the detection of islanding in distributed generation, we have used the wavelet transform which is due to the negative sequence component of current and voltage. The islanding condition is further detected when the detailed coefficient at the level-1 (d1) evidently isolates the event.