Intermittent character of the renewable energy sources and harmonic prone power electronic inverters are causing the power quality issues in renewable energy based microgrids (REMs). Hence, reliable and effective control strategies are required in order to address these issues. With this intent, this paper proposes a new control scheme based on virtual electric machines, named as 'Closed Loop Virtual DC Motor and Synchronous Generator (CLV-DCMSG) Control Scheme'. This scheme uses DC Motor-Synchronous generator set in virtual environment as a model that provides the modulating signals for controlling the inverter firing pulses continuously in a closed loop. The primary advantage of this scheme is that it can mimic the behavior of conventional synchronous generator based power plant in REMs. Due to this feature, it can control active/reactive power, voltage/frequency similar to conventional power plants. This feature helps in improving power quality in REMs. REM modeling/simulations are performed in MATLAB/Simulink® and validated with an experimental prototype through dSPACE®. The efficacy of the proposed scheme is assessed by computing various power quality indices. © 2016 IEEE.